From Pavement to Portfolio: what running can teach us about the 5 most common mistakes of investing. 

Imagine you woke up one morning and decided to start running. You might follow a Couch to 5K programme or just get out on the road and see how far you can go. As you get fitter, you might start to follow running accounts on Instagram or research how to make your form more efficient. After all, we can’t all be Eliud Kipchoge but we can all learn from the best and apply it to ourselves. 

When it comes to the 5 most common mistakes of investing, we see a huge overlap between those who crash and burn out of their marathon training and those who can’t weather a financial crash. It’s the same mistakes that trip people up – being overly ambitious, getting obsessed with timing and lack of diversity.  

1. Getting greedy: an overambitious start

If you stepped out your front door and attempted to run a marathon with no training, you would most likely injure yourself. Similarly, beginner investors may dive into high-risk investments, eager to make quick profits. Greedy investing can lead to irrational behaviour, excessive risk-taking and ultimately, big financial losses. Just as you would carefully structure a marathon training plan, focus on your long-term investments goals and follow a clear and personalised plan.  

2. Lack of Diversity

Runners try to incorporate different training styles to reduce risk of injury and build strength to support their running. Investors have a lot to learn from this – never overlook the importance of diversification.  

If I had a time machine and I had the opportunity to go back and invest in any one company, I would be a billionaire. But if I had to invest in one only one company now, I wouldn’t have a clue where to start (and here’s a secret – no one really does).  

Very few people have the ability to consistently pick winning stocks. That’s why diversifying your portfolio reduces your exposure to risk and increases your ability to weather market volatility. To diversify your portfolio the Fearless Girl way, you can read this article to find out how to invest in a single basket of stocks, and this one about how to stabilise your portfolio with bonds. 

3. You are obsessed with timing

Runners who obsess over their timing can push themselves too far too fast and may end up suffering from mental and physical fatigue which will force them to take a break. In investing, attempting to time the market by buying and selling frequently can lead to long-term losses. Equally, the cost of waiting for the perfect moment to invest will usually be greater than any gains you will make from buying at a lower price (check out this article to understand why!)  

Contributing consistently is better than trading in and out of the market and here at Fearless Girl Finance, we follow the ‘set it and forget it’ method of investing once every quarter and trusting that our financial plan is solid enough that we don’t need to keep checking back on it.  

4. Your emotions rule you

The best runners know that one bad run doesn’t mean you should throw the towel in. Emotionally reacting to market crashes is probably the most destructive mistake you can make. Fear or panic may cause you to sell your stocks at a lower price than you bought them, or cash out at a time when the market is about to turn.  

Remember that when you made your plan, you evaluated your risk tolerance. If you are feeling the emotional stress of losing money, it means you have miscalculated how much risk you can actually handle. Re-balance your portfolio so that you feel more comfortable. 

5. Lack of Proper Education

A runner who fails to educate themselves on the importance of warming up, correct form and rest days is going to struggle with lack of progress or injuries. Likewise, an investor who jumps straight into the market without understanding the basics of asset allocation, diversification, and risk management is susceptible to making uninformed decisions.

Educate yourself to avoid falling prey to emotional trading or being taken advantage of by brokers who charge high fees.  

Not paying attention to fees, such as management fees and transaction fees can significantly impact your investment returns over time. Educate yourself on the best way to invest for yourself to make sure no one else is getting a slice of your returns.  

Avoiding the 5 most common mistakes of investing 

When you’re starting out on your financial journey, instead of learning from the best, take a look at the worst investors. People who’ve gambled on a ‘sure thing’ or made a panicked decision to sell right before the market picked up are rarely long-term winners. It’s a thin line between boldness and recklessness, and an equally thin line between success and failure.  

Whether you’re pounding the pavements or navigating the markets, remember that slow and steady wins the race. The best thing we can do is to cultivate good habits and apply them consistently to our investing journeys. Mistakes happen but Fearless Girls know the only thing to do is to pick ourselves up from a stumble, reflect on our actions and keep putting one foot in front of another. That’s how we go the financial distance.  

 Will you adjust your investment strategies to avoid the 5 most common mistakes of investing? Let us know in the comments below or tag us @fearlessgirlfinance_ on Instagram!