8 Reasons Why Investing is Like Riding a Bike, and 1 Reason Why it is Not!
by Alexander Beard, on Aug 14, 2019 12:10:58 PM
On 4th August I rode 100 miles in the Prudential RideLondon 100 to raise money for one of our chosen charities, MyBnk.
MyBnk provides financial education and skills to children and young adults leaving care. I have seen too many instances where a lack of knowledge or experience has led to poor decision taking and long term financial struggles as a result.
Some long training rides have given me plenty of time to think about the similarities between cycling and investing.
1. Technology Plays a Part
Having a bike computer with GPS adds a whole level of information to help you improve your ride – speeds on different sections, power output, cadence (pedaling speed), energy consumed etc. All this information you can assess, review and use improve your performance.
There is a huge amount of information on investments and some very sophisticated software to analyse it all, much faster than any human could manage alone. Using this information investment managers can assess, review and analyse swiftly to then feed better decision making in future.2. Its Easier in Groups
Headwinds can make life very difficult for cyclists, so riding in tight groups makes it easier. That said, it doesn’t make it any easier for those in front who generally refer to those behind as “wheel suckers”! (we try to take turns in the front).
At Alexander Beard we work mainly with collective investment funds, where many investors can benefit from the cost savings and added diversification provided by large pooled funds.3. Talking of Diversification…
You can’t control the weather on the day of the ride. So this means training in a variety of conditions. If you brave the wind, rain and heat in training, you will be able to handle virtually any weather on the day (except perhaps snow and ice!).
You can’t control investment markets either. But when stock markets fall other assets can rise in response. Holding a mixed bag of assets puts you in a better position to weather the storm.4. Things go Up and Down
Hills can really slow you down, suck the energy from your legs and demoralise you. But the good news is that you will go really fast on the other side without much effort (my bike computer said I clocked over 50mph down one of the hills!).
Investment markets can feel more challenging when they are going down, but it is important to hold your nerve and keep going. On the other side, when values rise, things can move fastest of all.5. Regular Top Ups
You can burn a lot of energy on a long ride and so it is important to top up your reserves regularly with easy to digest snacks: flapjacks, bananas and energy gels are popular because you can eat them without stopping. Starting with a big meal can be very uncomfortable!
MyBnk teaches these things on a daily basis – effective budgeting means that you can regularly top up savings and investments with your spare cash. It is a great way to build wealth in the long term and for most people its not possible to start big.6. Your Risk vs Your Reward
Some riders can corner faster than others by leaning closer to the tarmac, some riders are bolder on the down hill sections reaching high speeds, and some riders are prepared to ride closer to others for greater aerodynamic savings but they may get less warning of dangers like potholes and bollards.
It is important to only take risks you are comfortable with and to ensure that you are in control of the bike at all times. There’s always someone going faster than you, but that’s no reason to take more risks.
Similarly with investing, its essential that you don’t take more risk than you are prepared to accept even if you feel that other people are getting higher returns.7. You Have to Actually Start
You won’t ride 100 miles without getting on the bike and pushing off. If you try and wait for the perfect weather conditions and your own peak of fitness it will just never happen. Its not first mile that matters, that’s just a warm-up, it’s the other 99 that count!
Waiting for the perfect moment to invest is impossible to get right. It’s no good worrying about whether you will get the highest return in the first days, weeks or months, it’s the years from now that matter. You just have to make a start.8. It takes time
You can only ride one mile at a time and you have to accept that it is going to take some time. But once you are up and moving momentum can be a big help.
Investing is no different, it takes time for the long term benefits to really roll in. The momentum of compounding investment returns year after year makes a big difference in the long run.9. Sitting Comfortably – The one Difference
After a long period of investment you should be sitting pretty, sitting back and reviewing all the growth you have made over the years, and perhaps chuckling over how much you worried when values fell here and there.
After many hours on one of those razor-like racing bike saddles you may not be sitting comfortably at all! That said, I do look back on the ride with a big smile. I set out to complete the ride in 5 hours, and was delighted to finish in 4 hours and 59 minutes. Should any readers think that is worth a bob or two I know that MyBnk would be extremely grateful for the support!