4 Lessons Going To The Gym Can Teach You About Investing
If you go to the gym, you already know that there is a lot more that goes on there than pushing weights and sweating buckets.
But what you may not realize is that you can learn a great deal about investing by simply observing what goes on with all the Iron Men and Women surrounding you. Here are 7 of the most important secrets I picked up at my local sports center:
1.Get the Right Job Done
Many people go to the gym because they want to work out and stay healthy. But sometimes it seems like most of the people are there to socialize more than sweat.
While investing isn’t really a social activity, it often morphs into something other than a way to build and maintain wealth.
Do you ever invest in something because it’s exciting or because your friends did? Did you ever invest in something (like Facebook) because you were afraid of being left behind or looking dumb if you didn’t participate? Did you ever extend a loan to a friend because you wanted to be nice?
Each of us have done some or all of the above (including myself) and they are all mistakes. When it comes to investing, remember why you are there and what your goals are. Then, invest accordingly. You’ll have to work hard at it but endeavor to keep your emotions and your money far apart.
2. Ignore Insider tips & Shortcuts
I remember sitting on my stationary bike or running on the treadmill and listening to the people on my right and left as they shared weight training and weight loss secrets. Even though I saw lots of people share tips, I rarely heard any two people share the same hush-hush tidbit.
Everyone had their own ideas about workout success. But when it comes to being fit, I don’t think there really are any secrets. If you want to be healthy it’s a question of energy in vs. energy out. Diet and Exercise. Just do it Simple.
It’s no different when it comes to money. In order to build wealth, you have to watch your spending, save well and invest wisely. Sure there is some learning involved but that’s the easy part.
Lack of understanding isn’t what stands in the way of most people’s financial success. It’s the willingness to do the hard work every day that gets us off track. Many of us look for the short cuts to wealth and when we do so, it usually ends up badly.
3. You may not need a gym or personal trainer
Some people do need a gym or trainer to actually work out but not everybody does. It took me a few years to realize it but I finally understood that I really didn’t need a gym. I happen to be pretty self-motivate when it comes to exercise (food is another story unfortunately).
Since I mainly used dumb bells and ran, it didn’t cost much to buy everything I needed to work out at home. More than saving money, I was interested in saving time. I was spending more time getting to and from the gym than I spent working out and I was tired of it.
Likewise, you may or may not need a financial advisor. Not everyone does. If you do your own research, call your own shots and are happy with the results, why on earth would you need an advisor? Assess your situation objectively and make sure you really need what you are paying for.
When I first joined the gym, I was interested in losing weight. I worked out like a fiend and became a very fit fat guy. What I really needed was to focus on my diet. Hours at the gym were never going to give me the result I needed.
When it comes to investments the same principle applies. Let’s say your objective is to save for retirement. This is a long-term objective which requires long-term thinking and long term investments. If you make risky investments in search of a quick score, you are barking up the wrong tree. Speculation is risky.
If you speculate you are taking on undue risk needlessly. While it would be nice to make a big score it’s just not that important. What is important is having enough money to retire when you are ready to do so. Make sure you invest accordingly.
5. Make sure you know how to use the equipment
There is nothing worse than seeing someone misuse equipment at the gym. They risk hurting themselves and others and it’s a frightening spectacle.
When you invest, are you certain you know which investments to select and how to use those financial tools? This point is connected of course to the point above about strategy. Long-term investments like mutual funds and ETFs require a different approach than individual stocks. Whatever your strategy is, make sure you use the right investments correctly.
6. Results Take Time
Years of working out never got me an invitation to compete in a Mr. Universe contest but it has helped me stay healthier than I otherwise would be. And even the modest results I saw weren’t immediate. It took a while before I stared seeing benefits from all that pushing and pulling, running and jumping. There were several times when I thought I was wasting my time and considered giving up.
Many people get impatient when it comes to investing too. This is extremely dangerous because it leads to making risky investments in the hopes of getting quick returns. Of course speculating doesn’t always lead to big losses – but given enough time, it does.
7. Don’t Expect Perfection
You can’t be an “animal” every time you suit up and show up. Some days, you just don’t have the energy and the best you can do is go through the motions. That’s OK.
When it comes to investing, you have to expect to get it wrong sometimes. You have to make decisions about a future you don’t have any certainty about. If you aren’t willing to see your account values decline from time to time, you’ll find it hard to stick with your strategy. Instead, you’ll jump in and out of the market based on your intuition and feelings. There is nothing wrong with having a strategy which guides you in and out of the market at different times. Not everyone needs to “buy and hold”. I don’t.
But you must use an investment approach even though it’s imperfect. And you must understand that no investment approach is perfect. No matter what you do, there will be times that you’ll be disappointed. That comes with the territory and you have to be willing to stay at it even though it may not be fun at times.
I learned a great deal about investing from the years I spent schlepping down to the gym. The main message is that investing, like working out, is not a “one size fits all” enterprise. But success is very much dependent on being persistent. Suit up, show up and do the work.
Do you think there are other similarities between going to the gym and investing? What are they?
Author: Neal Frankle. He is a CFP in Los Angeles and operates Wealth Pilgrim.com – an excellent personal finance blog.
Courtesy of Business Insider