Succeed in running, succeed in investing

REFLECTING on similarities between training for a marathon and investing

While running her first half marathon recently— which by the way, she finished at a faster pace than she had expected, popular stock analyst April Lee-Tan had some sort of an epiphany. The thirty-something president of CFA Society Philippines and head of research at leading online stock brokerage COL Financial couldn’t help but reflect on the similarities between training for a marathon and investing.

It all happened on Feb. 23 while participating at CFA Philippines’ Financial Fitness Run. She finished her half marathon in two hours and 26 minutes.

In a commentary about this realization issued by CFA Society, Tan shares these useful insights to be successful in both running and investing:

POPULAR stock analyst April Lee-Tan

1. Have a goal.

In running, you need to have a goal such as running a certain distance, for example, 5K, 10K, 21K or 42K) or improving your personal record (for example, 10K in less than one hour), Tan says.

As far as the “Financial Fitness Run” was concerned, Tan’s goal was to run her first 21K race.

An investor also needs to have a goal when investing, for instance earning your first million in five years or  buying your dream home in 10 years, she says.

“Having a goal helps you stay focused as you keep the end in mind,” she says.

2. Have a plan.

Once you have you have set a goal, you need to determine what kind of training is necessary for you to meet your objective. For Tan, she had to run regularly and lengthen the distance of her long runs by one kilometer every week until she hit 21K.

SAM YG (left), Gregg Osario (21K Top 2 Male Finisher) and April Tan

The same is seen true for investing. “You should determine how much money you need to set aside on a regular basis and what type of financial products you need to invest in to meet your goal.

For example, if your goal is to earn P1 million in five years, you need to set aside P14,000 a month assuming that your investment can generate a return of 8 percent annually. If that is the only amount that you can afford to set aside, you would need to invest in more aggressive financial products such as stocks to generate the return that you want (which in our example is 8 percent). If you can afford to set aside more, then you can choose to be more conservative in your investments and pick lower return but less volatile financial products such as bonds,” she says.

3. Be disciplined.

As she embraces running, Tan realizes the importance of being disciplined and training consistently to build strength and stamina. Any training plan for running involves training for at least three times a week and running a certain distance every week.

“While I was training, I had to drag myself out of bed as early as 4:30 am sometimes so that I could run my first 21k race in a good time by February,” she shares.

In investing, she says it’s also important to stay disciplined and invest consistently. No ningas cogon (that bad habit of doing something passionately only at the beginning), that is.

“You need to resist the temptation to spend unnecessarily on things that will only make you happy for a short time but have no lasting value so that you can meet your investment goals,” she says. Avoid splurging on hand-crafted coffees, designer bags or the latest gadgets, she adds.

4. Think long term.

“Strength and stamina can never be built in a day and you need to train for a certain amount of time to meet your running goal. For me, I had to train for almost four months to run my first 21K race, although prior to that I was already consistently running at a more relaxed pace,” she says.

Investing is also a long term exercise, she says, pointing out that there is no short cut to building wealth. By investing for the long      term, Tan says the odds of being ahead improve tremendously by virtue of the power of compounding.

“Did you know that a 25 year old who invests only P5,000 a month until he is 35 years old will have P20 million by the time he retires at age 65 (assuming a compounded annual return of 10 percent? On the other hand, a person who does the same thing but only starts investing at age 35 will only have P7 million by the time he retires,” she says.

5. Have mentors.

“It helps to talk to friends and more experienced runners and to read books on running to get tips when training for a run. I personally had a coach who helped me train for my first 21K race,” Tan says.

“When investing, it also helps to talk to friends who are successful investors and finance experts and to read different finance books to learn about the different investment vehicles and to get ideas on attractive investment opportunities that are available. They also help you stay disciplined in your investments,” she says.

Given the similarities of training for a marathon and investing, there’s no reason why you should be successful at running but not in investing. By sharing these insights, Tan hopes that more and more Filipinos, especially the young ones, will be successful in both.