By Dave Rowan
Learn more about Dave on NerdWallet's Ask an Advisor
As a lifelong exerciser, I know how important consistent physical activity is to one's health. And as a financial advisor, I see how this concept parallels the benefits of developing and committing to a long-term investing strategy.
I’m far from a fitness nut, but keeping physically active is a major part of what keeps me out of the doctor’s office and feeling great when I get out of bed. And it’s always been a part of my life. As a kid, I played baseball, basketball and volleyball. In college I played several intramural sports. Today, I do a lot of walking and hiking, some yoga and strength training, and a sprinkling of running.
Working out on the treadmill recently, I realized that the advice I give clients on long-term investing is a lot like the advice I’d give someone about long-term exercise. Over the years, I’ve observed three main similarities:
Sometimes, it's no fun
Everyone knows that exercise is good for you. But let’s face it, sometimes it stinks. For me, on February mornings when the alarm goes off at 5:25, my warm bed beckons me to hit the snooze button and hibernate for another hour. On those mornings, I’m not very chipper as I stumble out of bed to put on my workout gear.
But, invariably, once I’m up and moving, and my blood is pumping, I end up feeling much better than if I’d surrendered to the siren song of my cozy sheets and blankets.
You also know that being a long-term investor in stocks really stinks sometimes. Just recall the first week of this year when the Dow dropped 1,000 points. At times like this, it can be very tempting to surrender to the siren song of “playing it safe” and jumping out of the market. But, like exercise, staying with it for the long haul will always pay off far more than giving up because of the short-term discomfort.
Aggressive short-term strategies often don’t work.
As a kid, I didn’t realize what a gift it was to have a young body. I could take a few months off from regular exercise and then decide I was going to get back in shape. I’d hammer it for a few months in the gym and easily get back to feeling how I wanted to feel.
Now that I’m firmly into my 40s, I’ve experienced what over-exertion can do to my body, from trips to the chiropractor to months of recovery after weekend-warrior activities. I’ve learned my lesson: Pacing myself is key.
Just like there are no “get fit quick” schemes, there are no “get rich quick” schemes for investors. I learned some hard lessons early on as investor. Thinking I was going to make a quick buck, I poured money into technology stocks late in 1999. I realized in retrospect that I was jumping in at the height of the historic tech bubble that saw the Nasdaq fall 78% from its peak during the dotcom crash.
That was short-term thinking. Instead, choose tried-and-true, long-term investing strategies so you don’t hurt yourself in the process.
I have gravitated toward a mix of cardio exercise with yoga and some light work with free weights. This combination helps me with endurance, flexibility and strength. As a result, I’m ready for anything life throws my way, whether it’s a hiking trip with my family, playing football in the yard with my daughter on weekends, or performing in my daughter’s dance recital each year.
Similarly, it’s important to have a diversified investment portfolio that is ready for any opportunities or threats that the financial markets may throw your way. Some asset classes respond better in times of high inflation and some work well in periods of low inflation. Some investments work well when interest rates are increasing and others outperform when rates are falling. And at any one time across the globe, some countries are growing faster than others.
Mix up your investments just like you mix up your workouts so you’re prepared for any market situation.
The bottom line
What it takes to reach our fitness and investing goals is similar. We must be diligent about how we work out and how regularly we exercise. With our investing strategy, we must maintain a diverse selection of investments and a long-term perspective. This can be hard work on both accounts. And though hard work isn’t always fun, it’s rewarding. Ultimately, we must stay committed to what it takes to reach our goals — even when it stinks!
Dave Rowan is a certified financial planner and the founder of Rowan Financial.