Investing is a marathon, not a sprint. Anyone who tells you otherwise is probably trying to sell you something.
The “glass half full” view of this immutable reality is that novice investors have time to improve their skills and knowledge base. A single mistake won’t put you at a catastrophic disadvantage relative to your peers.
The “glass half empty” view: Even if novice investors have time to correct their mistakes, they’re still up against stiff competition. Marathon running is a profession, after all — you can’t expect to train for a month or two and run a 2:20 race. The incredible athletes who finish at the head of the pack in big-city marathons are fully committed to the discipline, just like the elite investment professionals who consistently beat the market.
So what if you never finish first (or, let’s be real, 100th) in the Berlin Marathon? If you work hard and stay healthy, you can probably be an above-average runner.
The same logic applies to investing. You might not become a household name by virtue of your uncommon investing skill — but, with the right tools at your disposal, you might handily beat the market on a consistent basis.
Of course, nothing is sure in life or investing. These strategies and tips can bend the odds in your favor, though.
- Spend Less Than You Earn
This is the golden rule of money management. And it’s much easier to follow than you might imagine, once you get into the habit. Say it like you mean it: Spend less than you earn.
- Use Personal Finance Apps to Track Your Daily Spending and Saving
Okay, saying you’ll spend less than you earn is one thing. Actually using personal finance apps to track your income, assets, obligations, and investments is quite another. Fortunately, mobile-friendly apps like Mint and Level Money make it easier than ever to see at a glance how much you have, how much you can spend, and how much you can put to work in the market.
- Gather Information from a Variety of Sources
Some information sources are more reliable than others, but no source — however expansive or well-regarded — should suffice as your sole source of market news and data, to say nothing of investing strategy or advice. Blend quotes and real-time data from reputable sources like CNBC and Yahoo Finance with commentary and insight from independent resources, like the Fisher Investments app. And never pass up the opportunity to talk face-to-face with seasoned investment professionals whose results speak for themselves.
- Expect the Unexpected
Have you ever seen a black swan in real life?
Probably not. Black swans are really, really rare. We hesitate to throw around terms like “freak of nature,” but — well, let’s just say every swan we know is snow white.
Perhaps not coincidentally, the term “black swan” is shorthand for events or outcomes that happen contrary to all evidence — outcomes that shouldn’t happen, but somehow still do. They often have political origins; the Brexit vote, in June 2016, is a recent (and consequential) example.
Black swan events and other market contradictions can upend the most carefully laid investment strategies, erasing meticulous theses in an instant.
By definition, it’s very difficult to anticipate black swans, though it’s certainly possible to prepare. In 2016, for instance, savvy investors hedged against the apparently low, but nevertheless nonzero, probability that U.K. voters would choose to leave the European Union. More generally, it’s crucial to expect the unexpected — to know that, no matter how well you prepare for what lies ahead, fate has a way of fighting back.
What are you doing to improve your investing IQ?