Investing Isn’t A Race, But Here’s Why You Should Treat It Like One

It was a smaller race and I spent most of the time alone, thinking about whatever runners think about. In this instance it was thinking about how running is like investing and it turns out there’s a lot the two have in common.

1. Choose your race.

I finished first in my age group this year, and took home a commemorative glass to remember the occasion. Last year in the same race, on the same weekend, at the same distance I finished third and left empty handed. The choice to run in a smaller field was unintentional but the point isn’t. If you invest in a less competitive field it’ll be easier to succeed. Charley Ellis said that much of his early success was thanks to not-very-good competition.

2. Run your race.

Before heading out family members asked how fast I might run and I told them I could get the race done in about twenty minutes. That meant not running too fast (or too slow, but that really never happens) during the first mile. There were plenty of people ahead of me at the one mile mark, but I didn’t care. My performance goal wasn’t the same as there. This mindset helps investors too.

3. Loss aversion.

Runners of all levels can appreciate the feeling of being passed up and the surge of effort it brings forth. Someone that thought they were running as fast they could suddenly finds a burst of — something to run alongside their competitor. That same feeling doesn’t come forth when it comes to passing someone. It feels worse to get beat by someone at the end than to squeak past someone in that same position.

You don’t have to be a runner to use this. You don’t even have to *exercise*! It helps though if you take things that work in one area and test them in another.

Good investors are excellent pattern recognizers. They take insights from one domain and apply them to another. Runners knows that consistent, regular miles prevent injuries because they acclimate the body to a certain level of stress. Investors can take a cue from this and build a consistently-performing portfolio if they avoid chasing the “hot” names that can look great for a while but can end up placing one’s overall returns toward the back of the pack in what should be considered a lifetime investing marathon.