I have been investing for over 25 years, and I know what it takes to be a successful investor. What I had not realized was how similar the actions and beliefs relating to investing were so close to the choices and thoughts related to weight loss.
Have you ever tried to lose weight? I have. Earlier this year I committed to a change in lifestyle I assumed would be an entirely physical undertaking. I was wrong. Even just to get to the starting line of weight loss, you have to get the mindset right.
After losing 20 pounds, I can tell you that successful investing looks a lot like successful weight loss. Obvious likenesses between the two aside — expensive products, conflicting “expert” advice, confusing strategies — there are three similarities that will see you through to the investing finish line.
You have to play the long game.
When I started to lose weight earlier this year, I weighed myself every day — sometimes twice a day. The results would throw me into various tailspins. It’s working, I have to buy all new (smaller) clothes! Or, it’s not working, no more food today!
And then I remembered how when I had started investing, over 25 years ago, I used to check the stock market almost hourly. I had to know what exactly was going on with my stocks. If they were going up, I was euphoric, and if they were going down, I was devastated. Should I sell everything? Should I buy more?
Not only was it unproductive, but it was a ridiculous waste of valuable time.
The daily or weekly (even monthly) fluctuations in your investments are just noise. Ignore them. Focus on the big-picture, long-term trend. For me, that is up for investments and down for weight. If that is working, relax and go for a walk or play with your kids.
You have to automate as much as you can.
The number one thing you can do to create a successful habit, and this includes starting to invest, is to automate as much as you can. Automation means little or no decisions, and in the case of investing (or losing weight), this is a very, very good thing.
Automating means a certain amount of money is deducted from your paycheque or bank account each month. And that you track your investments in a portfolio tracker. It also means you have annual review with yourself or a fee-only planner. The initial effort in setting up your automated contributions is the hardest part. After that? Rebalance once every few years and just follow the plan. Relax, go for a walk, play with your kids.
You have to believe in a future you.
How old are you? Are you going to be alive in 30 years? In 40 years? I am 43. I believe I am going to be alive in 30 or 40 years. I don’t want to be sick, diabetic or obese. I want to be healthy, and I want to be wealthy. That means taking steps today (no pun intended!) to prepare for a future me.
When I am 75 and living a still-active life, I don’t want to depend on the government for a few hundred dollars a month. I don’t want to have to ask my children for money. I don’t want to be consumed with regret about the choices I made in my forties.
What does this mean?
To have a decent apartment in my 80s, I have to take a pass on purchasing a new iPhone every year. And I have to put even a small amount of money each month into a well-diversified, low-fee investment. If I am doing that then we both know what I can do: relax, go for a walk, play with my kids.
It has never been easier—or as important—to start investing. What are you waiting for?