One absolutely rock-solid consistency I have come to recognize is that the fundamentals of success apply across the entire spectrum of your life, period, without question, end of discussion. More importantly, I’ve learned that if you understand the fundamentals of success, they will help you achieve more, even in areas outside your expertise. Here’s one example of how a fundamental principle of success I learned in the world of sports has helped me work more effectively with my financial advisors to manage my own money.
A very famous athlete once said, “You miss every shot you don’t take.” There is conjecture over which of two famous athletes said it first, but both ended their careers at the absolute pinnacle of their sport. You can decide who you want to give the credit to after you do your research. Truth is, the credit doesn’t matter, what we’re really interested in is the principle.
To most, the principle here is clear. If you don’t take the shot, you don’t sink the basket, or score the goal. The question here though, of course, is, how does this apply to practice of investing? Have you figured it out yet? It is one of the, if not the most fundamental principles of successful investing. Simply stated, if you’re not invested when the market moves, you don’t profit. Put another way, it’s not what you’re invested in, it’s when you’re invested.
Of course, this does not discount the need for in depth research and analysis. You have to do the work but when all your research and analysis, together with all the corroboration and advice of your most trusted advisors, provides convincing and compelling arguments that an opportunity exists, you need to position yourself in that investment right away. You can fine tune your position later, but waiting has, more often than not, resulted in even the most brilliant analysts missing out on significant profits because they waited.
Why? Because, while you can put almost total faith in your research, analysis and conclusions to identify the best opportunities and limit the risk associated with your investment decisions, timing the market is still a gamble. Here’s why;
If you evaluate any investment sector from the stock market to commodities to precious metals the trend is obvious. For more than 100 years the market has been going up. Sure, it actual goes up and down but if you take any 5- or 10-year period in history the market has finished at a higher price than where it started over 99% of the time. The problem is those ups and downs. The markets do not pay interest; therefore, they do not progress in a simple straight line.
The fact is that most of the time the markets meander. They go up a little, they go down a little, mostly inconsequentially but, when they move, they don’t fool around!
This why relying on the fundamentals of timing is a much better strategy than treating timing as an art. The reality of gains in the investment markets is this, every single major gain over history has taken place in period of 2 weeks or less. If you’re the artist and you try to catch the wave as it takes off, you’re going to miss it every time. If you’re invested, holding well-chosen vehicles in the sector you’re anticipating growth in, you’ll be taken for the ride, as long as you’ve taken the shot.
Remember, a rising tide lifts all boats, but your boat has to be in the water.