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What characteristics do those who run successful businesses have in common? What does it take for an athlete to reach the peak of their discipline? Why are some investors able to generate significant wealth when others don’t?
Angela Lee Duckworth, a psychology professor at the University of Pennsylvania, coined the term “grit”, a common characteristic shared by the successful people she studied, from a multitude of backgrounds and professions.
She discovered that passion, perseverance and stamina were the common key determinants of success, more so than talent.
This capacity to work hard and stay focused nurtured the “grit”, which is a key to success in business, academics, sport, and also investing.
Ultra-marathon investing
Earlier this month I completed my fourth Comrades Marathon. The 90km ultra-marathon, which is run every year in alternating directions between Durban and Pietermaritzburg, includes some of the most brutal hills imaginable.
This year, over 17 000 runners lined up at the start to tackle this test of human endurance.
For me personally, this year’s run was my toughest one yet. There was no specific reason, but at 20km into the race I felt “flat”, and despite having completed all the requisite training, I knew I was in for a long, tough day. The fact that I finished an hour slower than I was aiming for was irrelevant.
For me, there was huge satisfaction in “gritting” out a finish, despite things not going my way.
Reflecting on this year’s race, I was able to draw many parallels between finishing the Comrades and successful investing:
1. Time
Success in investing and success in an ultra-marathon both require a long-term focus.
The successful investor understands that a potent combination of time, patience and discipline is required to generate wealth, whether it is contributing monthly to an investment, or leaving that invested money to grow year after year – the longer the better.
Training for an ultra-marathon also requires countless mornings of discipline.
These small incremental training runs at dawn progressively build discipline and endurance to achieve the desired target. While progress towards the investing or running goal will at times feel slow, especially initially, starting the process as soon as possible is crucial. Warren Buffett understood the “grit” required to achieve wealth creation.
He took decades, until his 50s, before he really started to generate significant wealth. Successful investing is a marathon, not a sprint.
2. When the going gets tough
One of the reasons I am proud of completing this year’s Comrades in particular is because I knew from early on it was going to be a tough day. The satisfaction came from realising this, and pushing through anyway.
Investing, too, will challenge us with tough times. Looking at the local equity markets, one can see that investors’ patience and nerves have been tested, with the JSE All Share Index at similar levels to where it was this time three years ago.
Add heightened political risk and subdued economic growth, and it is evident that unwavering composure is required. Just as not all races will be personal bests, during certain times in the cycle, our investments will not perform as we would wish.
The challenge is to focus on our long-term goals, ensure we are invested where is most suitable to achieve those goals, and stay the course. Gritting it through the tough times is not easy, but history shows us that patient and disciplined investors are usually rewarded.
3. Personal plan
When preparing for a race as daunting as the Comrades, it is important to adopt a training plan that is tailored to your running ability, time available to train, and desired goal.
By doing so, you increase your probability of sticking to the required training, and of success on race day.
Investing is also very subjective, and requires you to take many personal factors into account. In formulating your investment goals, you need to combine your risk tolerance, risk required and risk capacity to construct a tailored investment plan that you are capable of sticking to in order to achieve your specific goals.
Long-term wealth creation does not simply happen. It requires hard work to determine and implement our goals, and patience in seeing them to fruition. Just as grit is required to successfully complete an ultra-marathon, you will also need it to stick to a long-term investment plan.
However, by retaining a long-term view, even when uncertainty strikes, and relentlessly focusing on the finish line, we will succeed in reaching our investment (and running) goals.
Devin Shutte is the head of investments at The Robert Group, a private wealth management company.
This article originally appeared in the 29 June edition of finweek. Buy and download the magazine here.
