No matter what our goal is, whether it is having enough money to invest in real estate, buying shares in a company, or having a rainy day fund. We are all aware that saving money is something that we should do. There are some of us that enjoy saving money. But most of us, if we do it at all, view it as a necessary evil.
There are articles everywhere we look. These articles have lots of technical jargon and advertising that often contradicts itself telling us about the best way to save and create our nest egg. How can we make sense of it all?
I like to equate managing personal finances with the sport of swimming. Using running as an analogy, here’s what I learned and how we can apply it to investing:
Maintain focus and a positive mindset
Over five years ago, I decided to learn how to swim long distance. Three months had passed since I made the decision to learn to swim properly. And as I stood in the pool, I realised that I hadn’t put much effort into learning for that day. That being said, I finished the swim and learned a valuable lesson while I was at it. Sure, we need physical stamina to swim a long distance, but mental stamina and strength are even more important. No matter how much physical training I did. I would never have had a chance of completing lap after lap if I had not remained focused, optimistic, and rational throughout the swim. The same thing goes for investing. If we don’t have focus and a positive mindset, success will not be within our reach.
Swimming carries all sorts of physical risks. Shortness of breath, sore necks, and pulled muscles are all common injuries. While we can’t avoid all risks in swimming, we can minimise them. For example, cross training by cycling can give us anaerobic benefits and reduce the impact on our arms and legs. Of course, we can’t count on the fact that our arms and legs will not last forever. So we need to also work on building up our abilities in other areas. In the world of investing, we need to do the same. Diversifying our portfolio across asset classes, instruments and geographies will minimise the risk. If we focus on only one type of investment, we increase our chances of losing it all.
Slow and steady
To finish a long distance swim, we need to set a healthy pace. By figuring out what pace we need to maintain, we are likely to cross the finish line and achieve our desired time. Translate this into the language of investing. If we have the proper long-term mindset and not take too many risks on any particular trade, we will be able to achieve success. On the other hand, if we throw everything we have into any one investment without thinking of the long-term, we risk not reaching our investing goals.
There are other races to be swum
It’s great to approach life with a sense of passion about something. But we don’t want to let it blind us so that we miss out on other experiences. In swimming, we may focus on that one big swim as if it were the only one to be swim. But in reality, there are lots of swimming races out there. It’s just that we don’t know about them because the one we are training for sucks up all of our attention. The same thing goes for investing. There will always be more investment opportunities. But if we get completely immersed in one particular opportunity, the others will pass us by without us noticing. We should always keep our mind focused on the big picture and our eyes on the multitude of opportunities to make money.
Don’t go it alone
Many swimmers have swimming partners and coaches to keep them motivated, provide expert advise and help them when there is an occasional injury. When I started swimming it took a number of injuries before it dawned on me that I couldn’t do it all by myself. Having a team by my side made all the difference in my success as a swimmer. Just as it is with swimming, investors need motivators, those with experience to provide advise and to point us in the right direction so that we can meet our financial goals. Seeking out advise is always a wise investment whether we are new to the markets or more seasoned investors.
Just as swimming has provided me with a lot of important lessons both inside and outside the sport that helped me finish the race. You can use the investing lessons listed here to also be able to reach your investing goals. What other lessons can we learn from swimming or any other endeavors we have engaged in and developed a passion for?