5 Similarities between life and investing

I started my career way back in 2006 in Jalandhar. I joined a firm which was into distribution of financial products mainly Mutual funds & insurance. Ten years and loosing lots of hair & turning lots of grey hair later I am now working as an investment trainer and coach helping the financial services industry. I travel like a vagabond from one city to another conducting workshops and seminars for investors and financial consultants alike. One of my constant endeavor has been to see investing in conjunction with our lives and spot the similarities between the two. I always say, ‘The formula that doesn’t work in life, doesn’t work in investments either.’ Let’s look at how investing and life are similar

1. There are risks in both

Life like investing is full of risks. We risk so many things in our day to day lives. For example – the risk of driving. You may be a good driver exercising every caution while driving but someone driving behind you might hit you if his/her vehicle spins out of control. We work hard for an exam or an interview but aren’t sure of the success. Deep in our heart we know that despite the best preparation we might fail miserably. There is so much pollution outside on the streets, we run the risk of inhaling so many hazardous gases. Similarly in all the investments that seek market related returns there are many risks that an investor undertakes while committing those investments. While these risks are necessary to be taken, they might also lead to losses. We may control certain risks, the others are purely beyond our control. In nutshell living and investing entails risk.

2. No Shortcuts

In order to achieve something really important in life, one has to put in lot of hard work. It is after years of relentless focus that we are able to achieve something  worthwhile. Same is true with investing. Investors who seek wealth traverse through the lanes of risk, boredom and unlimited passion in order to stand a cut above the rest. Good investors like good students keep their nose to the grindstone, resist temptations that come along, keep Arjuna like focus on  the long path of investing. Both of them know the importance of enjoying the journey and walking the long path.

3. Ups and downs

Life and investing are like a sea wave that goes up and down continuously. No two days are the same. One day you enjoy a smooth ride on the train of prosperity, while another day you might be biting the dust in battle of emotions. One year you may get a hefty bonus, good raise and lots of appreciation while another year you might have to take a dose of humiliation with a grin. Similarly market related investments may make you feel like a hero one day and as useless as a lifeguard posted at an Olympic swimming pool. You may be pocketing gains one day and bleeding losses at another point of time. The quality of our life as well investing depends upon how we balance these gyrations. How we take various emotions in our stride and enjoy this journey.

4. Importance of goal setting

I remember my mother insisting upon creating a time- table and more importantly following it too. Unless we plan extensively we won’t be able to achieve anything substantial. If you seek to become chairman of the organization you are working in as a trainee, then you very well know that you have a long journey of moving through rank and file to the final goal post of the coveted chair. Similarly in investing unless we set goals we can’t reach anywhere. Without a properly constructed financial plan and effective review mechanism we are like a sailor without compass lost at sea. Once we put an effective financial plan in place we increase our probability of achieving our goals much similar to a student with a well thought out study plan.

5. They are boring

Good life and good investing are always boring as they are built upon a systematic routine to be followed day in day out. This routine not only lacks glamor but is also hard to follow and many of us drop out along the way. Sometimes the routine sounds so foolish that even an idiot may say, ‘So??? If so much hard work is put, anyone can do it.’

Yes! anyone but an idiot.

People who can walk through the corridors of boredom generally find the gardens of spring along the way. There is no entertainment in investing. Good investing is as boring as life of a martinet.

I have come across many investors who started their journey well but somehow lost their way in between. When I look at the reasons of their dropping out I am not at all surprised. Although there are many reasons their unfinished journey can attributed to; one thing that stands out is that all of them failed to recognize the similarity between investing and life.