What Running Teaches You About Investing

“Running is not for me. I will never do it”. I have always said this, and my wife reminds me of this often. For years, I had friends who ran, and I appreciated them. As an early riser, I would see people running in the morning and would be content watching them from my balcony, with my “Chai and Smoke”. Frankly, if someone told me before Covid, I would be a runner, I would have probably deemed them fit for a mental asylum. “Never say Never”.

Covid changed all that. What started as something to kill boredom and just to get out, has become an addiction. Today, after 5000+ km of running, a half marathon in Ladakh and three back-to-back sub-2-hour half marathons, I have started looking at everything around me in new light. Running has been such a great teacher and those lessons can be applied to every walk of our life. As an active investor, I find them very relevant for investing and investors.

Sum of parts is greater than the whole.

I started running in April 2020. Had a pair of Nike shoes and joined a group of runners in the society, running three days a week to start with. The first few weeks was fine and was doing about 20-25 km a week. What mattered was just getting out and running. I wish it was that simple. Six weeks in, I picked up a bad sprain in the Ankle Tendon. I had no clue what happened, and it took me three weeks before I got back to running. I started seeing a physiotherapist, but then came across the graphic below, shared by my future coach and that was my first “Aha Moment”.

It is not just about the miles. You need to also focus on many other factors, that make those miles happen. It is about your gear, what you eat and drink, how you eat and drink, a regular weekly schedule for building strength and ample time to rest and recover. Running is also a solo sport and lot of it happens between the ears, in your mind. If you are a serious runner, you need to be prepared mentally. You need to have the right gear and over time I realised my best friends in running are my shoes, my roller and hydration. While each of them contributes to your overall goal, believe me the sum of parts is greater than the whole.

Investing is akin to running a marathon. Similar to running, Investing it is not just about putting money into the markets. If it were that simple, tens of millions would not be devouring books on Warren Buffet. There are multiple aspects to it and each one will play an equally important role in defining the outcomes.

Every investor who has been in the market for a decent time knows that to be successful, you need multiple factors to come together over a period of time. I don’t think anyone has figured out a formula for getting rich overnight and make fast money from the market, but a few things that you need to focus on are:

·       Quality of your investments.

·       Goals and expected outcomes and time horizons.

·       Asset allocation.

·       Approach to decision making.

Like running, investing is a solo sport and your mental models and thinking more often than not will shape the outcome and success.

Know Yourself!

What is your temperament? Do you understand your body?

These for me were the two important questions I had to answer over the past 3 years. When I started running, I was fortunate to be part of “Hyderabad Runners”, a bunch of amazing runners who have set standards. I also met runners across the country who are inspirational. But this comes with a risk. You tend to get carried away and will want to run like them. You see people doing ultra marathons and 90-minute half marathons. It is tempting to go for all of it, but wait! It took me some time to figure out what I wanted to do and more importantly what I can do and what I should focus on. Some people are able to run very long distances, some shorter distances but faster, and a few combine distance with pace. Many runners over a period of time, figure out their circle of competence and stick to it. It is not about, what you want to do, but what you can do.

From the beginning, I was cognizant of the fact that I never had a strong body from childhood. I needed to build strength over time. I had also taken to running late in life at 49, 25 years of which have been spent living a lifestyle built around, unhealthy, and undisciplined eating, alcohol, and smoking.  But at the same time, I was fortunate to have had the gift of nature: a lean frame, natural athletic build, suitable metabolism and restless nature that always kept me on the move. Thanks to many runners and their advice, I realized that, for starters I am more suited for shorter runs, where I can aim to get faster. So, my focus was on running half marathons, with the aim of getting faster over time. This focus has helped me immensely over the past 30 months.

As Investors, we keep hearing success stories every day. People who have identified and made money on those 10X baggers, traders who have successfully made millions, stories of legendary investors and their practices. It is easy to fall prey to all this and try to emulate them with the idea of getting rich quicker. I wish it was that easy.

From my experience, a few factors similar to running, that investors need to figure out:

·       What is your temperament. Some people are good at reading charts and technical analysis, and it helps them become successful traders. Some people like me just don’t get it, and there is no point even trying it. As they say, “Chaddi aur Baniyan Gayab Hojayegi”.

·       Are you the kind, like me who likes to dig deeper, understand the industry and business, do bottom-up research, identify quality companies and go long? Identify those few mutual funds that suit your style and just keep SIPing into them?

·       What life space are you in? What are your goals? What is your expectation out of your investments? And last but not the least, what is your risk appetite?

When you look around, successful investors are those, who have understood their temperament and altered their investing behaviour to suit it and continued that over time. It is good to appreciate, and at times feel envious about people who have figured out a way to do well. But if that does not suit your style, don’t even go there. I am sure, being naked in public is not a good feeling.

Consistency and Compounding

There is no substitute to consistency and discipline in running. This is something I learnt from the runner’s community and my coach. Just get into those shoes and run. It is not easy. Sometimes you just want to sleep that extra couple of hours. You have to brave the elements, cold, heat, rain, or humidity. Trust me, just keep going and hang-in there and it helps. I have been blessed to be able to do it consistently. There are odd bad days or bad months, but over a period of time you just keep doing it and it helps. This is my running over the past 32 months, and it averages to 8 km a day, 5 days a week. I have run in pouring rain and the crazy Hyderabad summers, on tired legs and aching joints, but the goal was simple, just keep running.

The results over time will surprise you. This is where compounding, the most underrated concept kicks-in. You keep adding a few kilometres every month and then a few seconds to your speed over time. Month to month it might not be noticeable, but when you look at it over longer time duration, the outcome will surprise you. I ran my first Half Marathon a day before I turned 50, on 29^th November 2020. Two years later, on November 27^th, 2022, I ran my fastest HM yet in Ahmedabad. The difference and the improvement are there to see. Just keep at it and trust the power of compounding 😊  

As Investors, we tend to ignore the effects of consistency and compounding over time. This despite enough having been written about it. Investing with consistency is the backbone for long-term wealth creation. Don’t stop investing especially when the stock market is falling but treat a falling market as the best time to increase your investments. And then add compounding to it. Don’t interrupt the power of compounding.

Morgan Housel puts it nicely. “What I want to have is endurance. If you understand the math of compounding, you know that the big gains come at the end of the period. If you’re investing for 30 years, the biggest gains in dollar terms are going to come in the last couple of years. That’s how the math of compounding works. It just gets exponentially higher as time goes on. So, to me, the number one thing that I want to do, and I think this is true for a lot of investors, is just maximize my endurance, maximize my durability as an investor. And I do that by having a reasonably high percentage of cash and having no debt. It’s not that I don’t want to take a lot of risk, it’s that I want to maximize for endurance.”

As a long-term investor, for me the most important lesson can be summarised in one graphic.

The secret to Warren Buffett’s enormous wealth is time. The more time your investment has to grow, the greater power of compounding it will achieve. Small changes in growth over years can lead to ridiculous outcomes. Because of consistency and compounding, vast majority of Buffet’s wealth came after he turned 60. It is easy to run behind multi-baggers and lose all you have. But the most critical component of investing is to preserve capital, minimize your losses and let it grow over the long run. You have to give compounding an opportunity to work its magic. It makes a ton of difference.

Don’t reinvent the wheel!

While running is an individual sport and you go through the pain and exhilaration yourself, I cannot stress the importance of “Community and Coach” enough.

An important learning from my ankle injury after the first few weeks of running: Do not reinvent the wheel. There is enough experience and body of knowledge out there, that you can tap into. There were enough runners around me, who were willing to share their experience and guide me through the best practices.

I decided to get myself a mentor and a coach, someone who understands running, whose experience of travelling the same path before me will help. Yet again, I got lucky and met Amit Kshirsagar. He had started running a few years before on his path to fitness and his achievements and journey were inspiring. He had run 2 back-to-back “Comrades” in South Africa and was preparing for the 100 mile “Hell Race” in Rajasthan. He was passionate about running, very knowledgeable and more importantly, was always willing to share. Just grabbed the opportunity with both the hands. It has been an incredible journey together over the last 30 months. Being part of Amit’s coaching cohort, Runrise.Milers has been such a learning experience. You motivate and encourage each other, share success and happiness and support during not so good times. Proud to be a Runrise.Miler. I have met runners from different parts of the country, and they were willing to share, encourage and guide all through. Blessed!!

Same applies to Investing. Investing is hard, but at the same time, the principles of success are fairly simple. It pays to have a good “Financial Advisor” and also be a part of a diverse “Investment Community” that helps you learn constantly, reflect and refresh.

My investment journey started back in time, but it took me quite some time to find my way through the jungle. I have committed a lot of mistakes, which could have been easily avoided. Many investors go through the I know it all syndrome and fall prey to this time is different fallacy. Until a decade ago, access to knowledge and people was not readily available and you had to spend time and effort to figure things out. It was ok reading books, but what you want is real on the ground advice, beyond the well encapsulated best practices from successful investors.

Today, the effort one needs to put in to access knowledge and people is a fraction of what it was. You need to find a “Good Advisor”, without vested interests, who would spend time understanding your needs, goals, context and expected outcomes. Your investment journey will become much easier. Various aspects of investing: asset allocation, investing style, decision making, goal setting and time horizons for outcomes will fall into place and investing from being a tension filled exercise will become a well-oiled machine.  

Towards the end of 2020, I was lost. I wanted to wrap by head around what was happening in the markets. Despite having seen them for 25 years, I could not fathom what was happening and I fell back on the “Wisdom of Crowds”. I have been fortunate to be part of two excellent communities, Capital Mind, and a private closed group. Possibly the best investing learning journey over the past couple of years. I have had an opportunity to learn so much from veterans as well as 20 somethings, with a clarity and grasp, I wish I had in my younger days. My ability to put complex things into perspective gained a definite edge and the learning went beyond stock picking and encompassed different aspects, reiterating the “Liberal Arts” nature of investing. I have learnt to keep things simple, develop a stronger discipline, appreciation for varied views and built an investment process that has so far and will stand the test of time.

Shit happens …. Learn and move on

Man proposes, but God disposes. Your best laid plans and preparations can come to nothing. There are always factors that are beyond your control.

Towards the end of the 2021-2022 running season in March 2022, I was confident that I can achieve that gold standard of running, a sub-2-hour Half Marathon. I was training hard, form was good and despite a fitness issue in August and September 2021, I had run by personal best at Goa in 2hrs 3 min in December 2021 and repeated that at Durgam Cheruvu HM in Hyderabad couple of weeks before the D-day. My coach decided to pace me for that race. Unfortunately, things did not turn-out as planned. Due to Omicron scare, the race got pushed to the last Sunday of March, typically not the time to organize a race in India. The weather turned bad the week before. It got very hot, humid, and muggy suddenly. On the race day, I started well, but my body was not able to take it. My stomach was burning, started feeling giddy and legs turned weak, and I had to abandon the race after 11kms. It was crushing and felt terrible for letting my coach down. It took me weeks before I put the disappointment behind. I continued with training and It was a hard wait for a new season and another 9 months, before I achieved the goal at Bangalore in October 2022 and repeated it in Ahmedabad and Mumbai the following months.

I realized, there was nothing wrong with my training or my abilities. There was nothing bad about my process or my goals. It was just bad luck and on that particular day in March, things did not work in my favour. Running is about skill and preparation, and most days the outcome will be good. There will be bad days and bad outcomes, but they are more bad luck and are not a reflection of your capabilities. Trust Your training.

While luck can play a larger role, same principles of refining and trusting your decision-making process applies to Investing. Despite all the best risk mitigating efforts and well-defined evaluation process, external factors can play havoc. We cannot predict pandemics, natural disasters, geopolitical events, or macro shocks. Best and the most successful investors have suffered drawdowns because of these unpredictable events.

Investment is inherently probabilistic. We do not know what the future holds and investors operate in a world of uncertainty and facts mingled with beliefs. Expectations, conditions, and context change over time. A lot depends on how investors approach their decision-making. Most investors acknowledge this point, but very few live by it. An investor’s approach to decision making might be the single most important facet of the investment process. Ask yourself:

·       Do you have a common and consistent approach?

·       Is your focus more on process than outcome?

·       Do you understand the role of time?

Long-term success in a probabilistic field like investing requires a disciplined and refined process tested over time. It does not mean inflexibility but highlights your ability to adapt. Focus on establishing a superior process and outcomes will take care of themselves. Despite reversals, black swans, and external shocks, over time, a good process turns-up better outcomes more often than not. Trust Your Process.

Final Words

It has been an incredible journey this past 36 months. In retrospect, I can say, Covid period taught me some of the best lessons of my life and gave me the most important gift in life – Running. I started late at 49, but better late than never 😊 It has also given me ample time to reflect on my investment philosophy and journey, an ability to synthesize complex things and connect the dots. This was a great opportunity in adversity, and I have only one word for this wonderful happenstance – GRATITUDE.

Running made me realise that both Investing and Running are literally different sides of the same coin. Both are journeys with incremental steps towards the final goal. There is no instant success in both, and they are boring repetitive slogs, day after day and month after month. It takes time to achieve your goals, but when you do reach them, it is the best feeling in life. As my dear friend NJ, a wise investor, summed it up:

·       You can start both at any age. There are no restrictions on when you can start, and the only requirement is the passion and will to do it. Neither of them requires any complicated qualifications and are open to anyone willing to learn and an open mind.

·       Both pursuits help you with your well-being in your later years. Running through good health and investing through good wealth.

·       Both require a SIP concept. Consistently keep putting in those efforts’ month after month and eventually the endurance compounds for the good.

·       Last but not the least, in both, your competition is yourself. You don't run to become a better runner than someone else, you run to become a better runner than yourself. Similarly, you don’t invest to become wealthier than others, you invest to grow your wealth.

Happy Running and Happy Investing!