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Personal investing

Principles for successful investing from the world of sport

Nothing quite unites South Africans like a good sporting event. During the months of July and August, South African sports fans were spoiled for choice as two of the national women's teams gained prominence on the global stage: the SPAR Proteas during the Netball World Cup in Cape Town and Banyana Banyana during the FIFA Women's World Cup in Australia and New Zealand.

Beyond the welcomed dose of optimism and “gees” injected into the news cycle, watching these teams presents an opportunity to reflect on some classic principles for success in various pursuits, including reaching your investment goals.

1. Managing emotional responses leads to better decision-making

Behavioural studies show that when the average person is faced with stressful situations, the mind switches from analytical reasoning to intuitive processing aimed at survival - a “fight-or-flight” response. Athletes are not immune to this; in fact, they learn how to leverage the adrenalin for their benefit. When it comes to long-term investing, tough economic times, poor fund performance or sensational news headlines can trigger the fear of losing money for investors. Unfortunately, many respond to this emotion by switching out of funds in pursuit of better prospects and land up locking in losses.

Conversely, investors who can resist the urge to act on fear can benefit from the power of compound interest and avoid missing out on periods of recovery that typically follow periods of poor performance. For example, an investor who invested R100 000 into the Allan Gray Balanced Fund 20 years ago and stayed invested throughout would have accumulated R1 185 830. If they had switched in and out of the Fund and missed the top five months of the Fund’s recovery, they would have only accumulated R784 735. This 2.3% difference in annualised return, sometimes referred to as the behaviour gap, signifies the cost of allowing emotions to lead the way in decision-making.

2. There is no substitute for patience

One of the reasons investors struggle to save for long-term goals is that the mind is not wired to perceive your “future self” decades down the line. This is compounded by living in a world increasingly driven by instant gratification and lifehacks.

When athletes achieve victories at the highest level, it is often a result of the consistent refinement of skill over a long time and an accumulation of lessons from wins and losses along the way. Before securing the Women’s Africa Cup of Nations in 2022, the title eluded Banyana Banyana on five occasions between 1995 and 2018. Similarly, achieving your long-term investment goals will require discipline, perseverance and commitment for an extended period. 

This is much easier said than done. What helps is ensuring that your investment plan is in line with your personal goals. In this way, your goals become the North Star of your decision-making, as opposed to external factors, which are unpredictable and unavoidable.

3. The right support is invaluable

Banyana Banyana coach Desiree Ellis and SPAR Proteas coach Norma Plummer may not have achieved the same level of attention as some of the star players over the course of the respective tournaments, but their behind-the-scenes efforts did not go unnoticed. While each player showed their unique skills and strengths, the magic was in the coaches’ abilities to use the individual talents for a greater collective outcome. Likewise, there is value in seeking out the skills of a financial professional to help make sense of the variables and numerous decisions to be made to reach long-term investment goals.

Of course, there are those who have the knowledge, appetite and resilience to manage their own investment portfolios – and do so successfully. However, many of us could benefit from the assistance of an independent financial adviser (IFA). Not only can an IFA assist in setting up an investment plan that is right for your circumstances, but they also play gatekeeper against common behavioural mistakes, like switching out of funds at inappropriate times or cashing in retirement savings between jobs, and help prepare for significant life changes such as marriage or the addition of a new child in the family.

Mastering ourselves can lead to greater success

Long-term investing is not an easy game; often, the greatest opponent is your own financial behaviour and poor decision-making. Drawing on the above principles can enable you to get out of your own way and increase your chances of success in the long term.   

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