Reading up on how other people have invested their money has taught me many lessons. There are a few common themes to lifelong investing success that keep popping up. The importance of a holistic financial plan, diversifying your portfolio, keeping costs as low as possible etc… But the one aspect of investing that rings true throughout is the importance of patience. It takes a great deal of perseverance to withstand market draw-downs. Mental toughness is a skill that all investors desire.
Recently I listened to the What’s Next podcast, put out by my friend Anthony Cinelli . The goal of the podcast is to help collegiate athletes transition into the “real world” by telling stories of those that have already made that transition. Last week’s episode was the first part in a two part series with Adam Greenberg, a former collegiate and Major League Baseball player.
Fittingly enough, the title of the podcast is “The Art of Perseverance“. Adam discusses how everyone is born with the gift of perseverance. Some people choose to practice and harvest that gift while some let it diminish within them. Cinelli follows up that point by saying “”We often look at things like playing a piano as a skill. And we invest all this money and have patience with it. But when we look at mental skills like being attentive, resilient, or perseverant there isn’t nearly the same investment.” I immediately thought back to the mental skills necessary to successful investing.
So how do investors practice and invest in their own mental skills? I think it starts with awareness, which comes from reflection. Some of us might get that itchy trigger finger when the market starts to drop. It’s important to realize that you’re becoming anxious and scared of losing money. Once you realize these emotions, the next step is to find a way to persevere through them.
Everyone will have a different way to do this, but I’ll offer a few suggestions. A profound way for investors to train their skills in perseverance is to read. A great place to start would be reading up on how famous investors such as Warren Buffet or Charlie Munger got to where there are now. Undoubtedly, one of the lessons you will learn is that patience and mental toughness are THE most important aspects of successful investing.
Having some sort of visual aid is another great way to remind you to persevere through market downturns. . Visual or auditory aids are an amazing way for us to remind ourselves of certain truths we like to forget when they become uncomfortable. Emotions have a funny way of blinding rationality. This image from Ben Carlson’s blog a few years ago is one of my favorite reminders that perseverance in the markets will be rewarded.
Also you could talk with your financial advisor to get you back on track. A good financial advisor will be able to check your emotions and keep you on track for the long-term. After all one of the main jobs of a financial advisor is to stop clients from making emotional decisions with their money.
Perseverance in investing often means sitting on your hands and doing nothing. This is what makes it so tough. We have a belief as humans that action leads to better results. Investors need to realize that inaction is a form of action. It may feel better in the short term to sell that stock or get out of the market when times get tough. Having the mental toughness to persevere and stick with your plan will most likely benefit you in the long run. That’s why having an investment strategy that you can stick with over the long-term is the best strategy.
Many of us train and invest resources to perform at a high level in sports, our jobs, playing music or performing arts. I urge those looking to have success in the market to practice the mental skills needed to do so. There’s no way to be perseverant without practicing.
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