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Wednesday, 24 August 2016

The Investment Marathon

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A bunch of sweaty people. 
Oh no! I promised myself that this would never happen!

Those of you who have read my About page will know that I am an avid runner. Now I really did try my best not to do an article comparing running to investing, but every time I am out on the road, the similarities smack me in the face! I guess it was inevitable. So here it is, cringe-worthy metaphors at their very best!


A marathon is 42.2km long - and you know that with such a weird distance there is definitely going to be some history attached. From Wikipedia - "The name Marathon comes from the legend of Philippides or Pheidippides, the Greek messenger. The legend states that he was sent from the battlefield of Marathon to Athens to announce that the Persians had been defeated in the Battle of Marathon (in which he had just fought), which took place in August or September, 490 BC. It is said that he ran the entire distance without stopping and burst into the assembly, exclaiming νενικήκαμεν (nenikekamen, "we have won!"), before collapsing and dying."

So the very first marathon runner died from the experience, which does make you wonder if people should be doing this! But thousands do, and of course why stop there? If a marathon wasn't enough, there are numerous Ultra Marathons (more than 42.2km long) around the world, perhaps the most famous of all our very own Comrades Marathon. I think there is just something about the running spirit that keeps people coming back1. Once you complete a marathon or ultra it will change you forever!

So with that little history lesson and background out the way, I present you with the remarkable similarities between investing and marathon running.

Entering The Race

Needless to say, you can't run a marathon unless you have entered. You need to decide on a race, and then commit. I find that the fixed date and goal I have set goes a long way to motivating the training and keeping the discipline leading up to the race. In the same way when I decided to "Enter" the Early Retirement Investment Marathon, I knew that the fixed date and end goal would keep me disciplined and motivated.

Training

There is A LOT of preparation that goes into getting yourself ready to run a marathon (you looking at around 11 weeks worth of hard training)2. The idea is that you start very small and then build up slowly as you get fitter and stronger. In the same way, before you embark on an Investment Marathon, you need to be fully "trained". Start slowly and learn the basics, and build from there. Read a lot, educate yourself. The better your preparation, the better your experience will be. There are fantastic resources available online, you just need to be prepared to find them and learn from them. Make use of these and let's all get financially fit!

In general the harder you train for a marathon the better your marathon experience will be. But it is also quite easy to be over trained and end up burnt out. In a similar way don't try to learn everything there is to know about investing overnight. You will "injure" yourself (or just end up feeling overwhelmed and with a massive headache). I began DIY investing around 5 years ago and I still find myself learning something new almost every day.

What is nice about running is that you can pretty much train anywhere - at home, on a business trip, or while at a destination wedding (true story!) You can also learn about investing anywhere and anytime - do some reading on an aeroplane, listen to a podcast while on your way to work, read a news article before bedtime.

Sacrifice

Before deciding to undertake a marathon you have to accept that sacrifices will need to be made. You may have to skip social events on nights before your long training runs. There will be early mornings, and time away from your family while you are out on the road. In the same way, an Investment Marathon will require some sacrifices - I don't plan on buying a new car in a very long time, we very seldom eat out at "fancy" restaurants3 (or even regular restaurants for that matter), and we do not pay DSTV.

Gear

In my experience you can make running as expensive or cheap as you like. If you want, you can get a watch that will track your elevation gain, heart rate, your pace against a ghost runner and do the dishes when you get home! You can buy compression socks, you can wear fancy sunglasses. All this gear can help, but honestly all you really need for running is a pair of good shoes and you pretty much set.

Investing is similar - all you really need is a good pair of ETF's. If you want you can go the fancy route like Unit Trusts or hedge funds. These are however costly, and you really don't need them. And while running gear can definitely help your cause, the fancy "Investment Gear" almost never helps!

The Competition

So now you arrive at the start, prepared and raring to go. You begin looking around at the other participants and eyeing out the competition. But this is stupid! Some people are slower and some people are faster. A marathon is a very personal race, and each person has their own target and goals. A 5 hour marathon for some might represent failure, but for someone else it is the greatest achievement of their life. In the same way you will always be earning less than some people and more than other people. Run your own investment race and have your own investment target! There will always be people that are "faster" than you and those that are "slower" than you.

Slow starts and toilet breaks

During a marathon you will quickly realise that some things are out of your control. If there is a big field, your start will be slow, and you will waste some time getting over the start line. Maybe you will need a toilet break, and this will waste some more time. But both these things are out of your control. Yes they will affect your time, but there is nothing you can do about it. You just got to keep running.

During your investment marathon, things will happen that you cannot control (Brexit, Rand Crashes, Trump becomes president?). Don't fight it, try change it, or worst of all give up. Just keep running!

Pacing


I ran a sub 2h30 marathon once - best dream ever!
An important consideration for any marathon is knowing how fast you need to go in order to make your target time. Your pacing needs to be spot on if you want to run your best possible time. If you are over eager and start too fast you will not last, and you will end up suffering later and miss your target time. In a similar way don't be over eager and invest too much - remember you need to meet your monthly expenses as well. It will be very demotivating having to sell some shares you just bought because your bank balance is 0 and you need to do some urgent plumbing. Know your budget!

In a marathon it is also possible that you go too slow. This means you will again miss your target time, but worse still, you will know that you could have done better! In the same way, don't allow your expenses to be too high which will result in your investment growing "too slowly" and knowing that you could have done better and achieved your investment goal quicker.

Marshalls

Along the marathon route there are Marshalls stationed to help guide the runners and look after their safety. Make use of the "Investment Marshalls" out there. The folks over at Just One Lap are always keen to help and seldom shy away from a question. You could also check out my Likes Page for a list of useful online resources. And always remember, Google is your friend!

Gradients

While some marathon routes are easier than others, all marathons have downhills and uphills (and usually one particularly tough uphill with an appropriately demotivating name like "Heartbreak Hill" or "You Going To Die Mountain"). Depending on market performance you might have an easy Investment Marathon, or there may be some very tough uphills with names like "2008 Financial Crisis" or "Dot Com Bubble". But eventually these hills are summitted, and there will be a downhill on the other side, which will allow you to make back some of the time (or in this case money) lost on the uphills. The important thing is once again to just keep moving forward!

Water Tables

Normally a marathon will have around 15 water tables. I have 15 years to early retirement. Coincidence? I think not! 1 Water Table = 1 Year.

Water tables are situated around every 3km on a Marathon route. They usually stock water, coke and sometimes bananas and sweets. A water table allows you to gather your thoughts and assess how your race is progressing. On my Investment Marathon I will take a water break every year to see how I am progressing. Am I on track? Do I need to change anything? I will also use the opportunity to prune my budget. If I received an annual increase I need to decide how much of it will cover my cost inflation and how I will allocate the rest.

The Finish


Possibly the coolest medal ever? I will see your fire
breathing Great White Shark, and raise you a medal
with a freaking tank on it!
Oh man there is no better feeling than knowing you are close to the finish line. You dig deep and give one final push. All the hard work, training and sacrifices have all been worth it as you surge over the line and claim your medal. Those that have experienced this feeling will know what I am talking about. I think that the reason people go back and run marathon after marathon is because the finishing feeling is so overwhelmingly awesome that when you think back to the race you cannot recall the pain and fatigue, all you can remember is finishing!

I suspect when I get close to the end of my Investment Marathon I will feel the same rush as I claim my Early Retirement medal and wear it proudly around my neck.



Sub 15 Year Finish

So there you have it - "The Investment Marathon" - complete with shameful comparisons and painful metaphors! Personally,  I have "Entered My Race", "Done my Training", "Got My Gear" and I'm looking for a sub 15-year finish time4. I will hopefully see you all at the next "water table"... Okay okay I think you get the analogy! :-P



Till next time, Stay Stealthy!

 - ~ - ~

1 Anyone who has competed in a race (even a 10km) will know what I am talking about. The running community are a remarkable bunch of bad-ass people, and the togetherness you experience out on the road is second to none - just ask any member of the public who has tried to disobey a marshall and drive their car across the route during a race!

2 I still sometimes think back to my very first training run in preparation for Comrades - it was 5km of pain, and took me about a week to recover. But from there I built it up slowly each week until I was ready to do the business.

3 Mrs Stealthy Wealth is a fantastic cook, and we often leave a restaurant knowing she could have done a better job - lucky me!

4 Co-incidentally I plan on doing plenty of actual marathons once I am retired!