If you are reading this article, you probably thought – random topic. What does running have to do with my investment portfolio, right? Well, keep reading, because the answer is much more than you think.
We all need an escape some days, and mine is trail running. And a lot of it. There is something about mountains and distance that brings me absolute peace. At the end of 2021, I had the incredible experience of running the OTTER. The route profile looks something like this…
42km of trail, with roughly 2 600m elevation gain and a major river crossing. And MANY ups and downs.
Not only does an ultra-trail route profile look very similar to market movements over time, but preparing to run one, requires a similar approach to building a resilient investment portfolio.
- Focus on the finish line – what we are aiming to achieve – successfully and alive. This can be compared to retirement. When we start to build our investment portfolios, we need to start with the end in mind and then break it down from there.
- With what lifestyle do you want to retire?
- At what age?
- What do you need to do to achieve this?2
- Starting off. Training is hard work, and you need time and commitment. Yes – this is a long journey, a lifelong one. We need to prepare from day one. The first day you start earning an income you need to start building your investment portfolio. If your initial preparation is done right, you will save yourself many mistakes and a lot of time in the future.
- Choosing the right equipment. If you have done some endurance training in your life, you will know that gear is extremely important. Choosing the wrong shoes, socks or pants – and you will potentially endure a lot of pain (and blisters!). The same applies to your investment portfolio. Making the right choices with the assistance of a financial advisor from the start will ensure a more pleasant experience.
- Ensuring you are optimising your annual tax benefits from day one.
- Choosing the right investment vehicles – there will be different ones as they all play a different role in your portfolio.
- Ensuring you are invested in the correct investment portfolios.
- Look out for fee structures and penalty structures!
- Nutrition: on an ultra, this is a make-or-break component. It can make you win, or leave you dehydrated with crashed glucose levels on a drip – unable to finish the race. With the Otter there is a strict rule that you need “emergency food” – this means you are not allowed to use this if not in an emergency. At the end of the race, they check your hydration pack to see if you have these items left. If not, you will be penalised. When building an investment portfolio, saving sufficiently is imperative. You can have the optimal portfolio, earning double-digit returns. If you are not saving sufficiently compared to your income, your end result will not be successful.
- Ensure you have an emergency fund in place. Strictly for emergencies. This needs to be three to six months’ income requirements.
- You need to be saving 15% to 20% of your income (assuming you are starting to invest the moment you start earning an income to ensure a comfortable retirement). Only 6% of South Africans can comfortably retire at this stage, therefore this needs to be prioritised from day one.
- Planning for the unexpected. With an ultra-race, as in life, there are many variables that cannot be planned for. The temperature can change from intense heat to extreme cold conditions. The way your body responds to the strain and distance of the day. The impact of a fall or other injury. You need to adapt and move on. In life, we also need to plan for unexpected events.
- Do you have emergency funds in place?
- Is there sufficient life cover for your loved ones should something happen to you?
- Do you have appropriate risk cover in place to protect yourself against illness or injury?
- When last did you update your will?
- Choose the right partner. Just as a training partner will motivate you on those 5am mornings, or on the dark winter rainy days, choosing the right financial advisor to walk this journey with you can be life-changing. Your advisor will guide you through the dark times, help you in times of need or emergency, and ultimately help you achieve your life goals!
- There will be ups and downs – use them! Don’t try to time the market, that is impossible. But you can optimise the cycles. Corrections will always happen, they are an essential part of market cycles. Use them wisely!