Post of the Day
December 14, 1999
Folly in Wisconsin
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Investing for the Long Run
I run. I run long distances. In fact, I'm training to run a marathon (26.2 miles). One of the best things about running is that during my runs, I switch brains. The logical, left side that I use most of the day gets a chance to take it easy and allows my slightly more creative (and interesting) right side have some fun. Sunday (after another Packer victory :) I went for my weekly long run--about 90 minutes (my left brain wants to tell you it was actually 90 minutes, 7 seconds). During this run, one of the thoughts that I stumbled across was that there were a lot of lessons I've learned in my running career that I can apply to my investing career. The first step is the most important. Until you start, you are actually losing ground. The sooner inertia is with you, the easier success will come.
|"In both running and investing, you face a relentless competitor--the clock."|
In both running and investing, you face a relentless competitor--the clock. Tic, toc, tic, toc. It does not stop.
Whatever your goal is, the more time you have to achieve it the easier it will be. The human body has a tremendous ability to adapt to the stresses put on it, but it will break. The best strategy is to slowly increase the stress.
Learn to walk 10 minutes a day, when that is easy, try 15. When you can walk 30 minutes a day, run for 1 minute, walk for two. Slowly build up until you can run for 30 minutes.
Once, when I was a fool, I increased my monthly mileage from about 100 miles/month to 200/month. No gentle increase. The injuries started right away, minor at first. But it only took 3 months before I had a knee injury that stopped me from running for several months.
Same thing with investing--the earlier you get started, the more time is on your side--the easier it is to achieve a goal.
At the age 30 (which I am rapidly approaching) an investor starting from scratch, need to invest about $17,500 a year, earning 10% annual (after taxes) to reach $1,000,000 by the time he turns 50.
While the Foolish newborn who starts her nest age at birth, only needs to invest $860 a year to be millionaire at the age 50.
That's only $43,000 total capital!!! Or two and a half years worth of what the 30-year old needs to invest. Give time and compound interest a chance.
So get started yesterday!
|"Putting your first investment dollars in some of the the bluest of the blue chips is good way to start building wealth."|
Build a solid base first, add speed later. The training strategy I believe in is largely credited to the New Zealand coach, Arthur Lydriad. Lydriad believes in having his runners start a training season by building base. This entails running a lot of "long, slow distance" (aka LSD) to build base fitness. This trains the body to handle a large workload, which will be needed later.
The second phase of Lydriad's training includes adding hill work to your running. At first, just including several hills in you running and then gradually doing hills over and over. This is a precursor to true "speed" work. Going uphill strengthens the leg muscles while going down (at a fast clip) helps develop quick turnover (a fast rpm).
Finally, near the end of the season, Lydriad puts his runners on the track for fast, intense speed work. This helps the runner peak for the most important races of the year.
While the shifts between three different phases are best down slowly, you may want to envision the breakdown to be roughly 60% base, 30% hill, and 10% speed work.
Using this method allows the runner to achieve more because it helps develop the runner well protecting him from injury. The LSD running is slow and comfortable (and safer). By building a good foundation first, the runner can later add faster (and more injury-prone) training when the body can handle it better.
I believe the Lydriad system is similar to The Motley Fool's investing plan.
Build base with the Foolish Four and Rule Makers (those who are more conservative, with an Index Fund). Putting your first investment dollars in some of the the bluest of the blue chips is good way to start building wealth. Later, when you have more experience and capital to work with, you can add more pa-zazz to your portfolio.
Working in some Rule Breakers will add a little more gusto to your portfolio (along with more risk). Doing this will also prepare you to top off your investment portfolio with small caps. These can help your portfolio develop a killer kick.
You could spread your capital between 60% Foolish Four/Rule Makers, 30% Rule Breakers, and 10% Small Cap.
In both running & investing, it makes sense to build a base of resource (fitness or capital) that can support more intense (and riskier) effort.
It also makes sense to quit while you are ahead. I've got analogies up the wahzoo that I want to share, but it is probably best not to force in terms like "fartlek", "runner's trots", or "negative splits". There also is a killer analogy between taxes and wind resistance that is screaming to be made.
"There is no Finish Line" -Nike Ad
Matt, running on & on in Eau Claire
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