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Real World Bike Race


The first half of the race was literally a breeze. We enjoyed tailwinds in excess of 60 km/h, making my normally average (though respectable) cycling times look heroic. I arrived at the midpoint in good shape and shattered my personal record in the process.

The second half wasn’t quite so comfortable. After a welcome break, we set off again and … uh-oh. Those tailwinds were now headwinds, and with interest, as the wind picked up with regular gusts of more than 100 km/h.

The funny thing about a tailwind is that it makes lots of riders look fast. It’s easier to stay on course, and everyone is happy!

With a headwind, it’s easy to get knocked off course by a sudden gust or find yourself progressing slower than you might have expected. When this happens, it can be tempting to rethink your strategy or even abandon your plan. And I’ll admit that temptation was certainly going through my mind as I passed by several bus and train stops!

But I kept coming back to two of my principles for investing success — creating clear, appropriate investment goals and maintaining perspective and long-term discipline.

Back in the real world…

The key with goals is making sure they are attainable in the real world. It comes back to setting realistic expectations for the market conditions you’re likely to experience.

So in an investment tailwind of high interest rates and low equity valuations, it could be reasonable to expect high returns, particularly if you’re heavily leveraged. This was the case throughout the 1980s, 1990s and much of the early 2000s. In contrast, when rates are low and valuations full or even a bit stretched, you can’t expect your investment portfolio to grow as quickly.

On the bike, with a tailwind, a personal-best time was within my grasp, and indeed, could be achieved without too much effort. But with a headwind a personal best was out of the question. I was focused more on survival, expending the right amount of energy to complete the race without quitting.

The experience proved to me that with discipline, you can reach your goal.

You just need to accept that it may take a bit more time — and you may need to train harder or pedal longer. In an investment environment characterized by low returns, low rates, low inflation and low growth, that means investors may need to adjust their goals, and consider saving more and spending less.

Discipline is what it takes to block out the noise, commitment is what it takes to walk the path to financial success and patience is what it takes to reach the goal.

Clement Chung, CFP, CLU

Certified Financial Planner

www.clementchung.com


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CLEMENT CHUNG, CFP, CLU

Certified Financial Planner

Fee-Based Financial Planning
Burnaby & Metro Vancouver

©2018 by Clement Chung.