Even though I am a financial professional, I cannot say with any degree of certainty that I am a better investor than anyone else. I typically embrace a minimalist lifestyle – much to my wife’s chagrin – in all aspects of my life, and our investments are no different. For example, I tend to invest in companies that I deem to have decent prospects, and I monitor their performance very infrequently. Because investing is essentially weighing probabilities and placing a bet on the future, I understand there is a great deal of chance involved, so I assume a minimalist, long-term approach will tilt the odds in my favor by reducing known impediments to success such as high fees and too much activity.
Yet I was not always so passive with my investments. I have cost myself far more money by being far too eager to realize a quick profit and selling too soon than by holding too long, even during the depths of the financial crisis. I ignored fundamentals by allowing myself to get sucked in by sales-pitch narratives such as “Company X is sure to be the next 10-bagger,” or “Y Corp. is going to revolutionize the world.”
Eventually, however, I came to realize the errors of my ways, but not necessarily by learning from these exact investment mistakes. In reality, I owe much of the change in my investment behavior to the lessons learned from various activities and hobbies in which I have engaged over the last decade.
For example, my ability to focus on long-term objectives was really aided and developed by my decision to begin running long distances. I had once heard that it is easier to motivate oneself to run great distances if you train yourself on running to something as opposed to running away from something. Running away from something, assuming it is dangerous or something like that, can produce adrenaline and give you the boost needed to make your escape, but it not really sustainable over longer distances. Training yourself to run to something – a physical landmark, a certain goal to be realized, whatever – means that you have bring into focus everything necessary to get there, – economy of motion, conservation of energy, and, most importantly, the discipline to keep trying, – are what carry you to that longer-term objective.
Along these same lines is weight-training. It is always a humbling experience to begin training with weights. Assuming you want to do the exercises correctly, you will likely have to submit yourself to the observation and instruction of a trainer, whose job it is to make you feel weak by helping you first identify and then correct your weaknesses. You must forego a lot of current gratification in the way of sleep and comfort to master the techniques and advance in weight lifted, but the humility you learn from coming to terms with your weaknesses is of the greatest benefit, and can pay huge dividends when applied to other aspects of life.
Shooting sports – whether archery or riflery – are also activities that taught me a great deal. First of all, like any investment, firearms and bows can be very dangerous, and the decision to take them up as tools to master is a very serious one. Unlike other sports, there are very real consequences to making a mistake with a gun or a bow, and the realization of this helps one to focus on the task at hand much more than, say, casually shooting a basketball. To shoot any weapon with some degree of effectiveness requires calm and patience as you have to master your body’s inherent instability and concentrate on the variables down range – windage, gravity, humidity, etc – that can make you miss your mark. For me, learning this was of great value when it came to my finances as it helped me to understand which variables to consider, and which to ignore while attempting to do something both very dangerous and difficult.
The lesson here is that investing really is not all that different from other endeavors. The basic principles of mastering the fundamentals, maintaining discipline, and knowing your own weaknesses apply to everything in life. If you struggle with poor investment behavior, my advice is to take up activities that interest you and that can help you learn and master basic skills that will serve you well in improving yourself as an investor. Over the long run, they will yield greater results than you can currently imagine.