Will Slow and Steady Win the Investing Race?

Are you too focused on “winning” the investing race? Maybe slow and steady wins the race for YOU.

I'm participating in Grow Your Dough again this year, and I'm excited to see how well my portfolio does. I'm experimenting with assets — in an asset allocation — that I wouldn't normally use. And, so far, I can't complain about the results.
As of this writing, I'm in fourth place, but for a very brief period of time one day in January, I was even NUMBER ONE. And I frequently make an appearance in the top three. At least, that's how it's been for the first month of the competition. Who knows how things will play out the rest of the year. Can't get too cocky.

The real problem is that I need to figure out how to stop myself from viewing this as an investing race that I need to “win.” That's part of what caused me problems last year. It's hard not to see yourself in competition against others when you are, in fact, in a friendly competition with others. However, it's also important not to see your portfolio as an investing race that needs to be “won.”

Defining “Winning” Beyond the Investing Race

There are lots of ways to define “winning” when it comes to investing. Unfortunately, most of the ways that we view winning only encourage us to make poor investment decisions as a whole. We are afraid of investing, or we have to “prove” something to others, or we feel like we've failed if we don't “beat the market.”

I know first hand how this type of investing race can be seductive. I love looking at my Motif performance and seeing that I'm beating the S&P 500 (the green line on the chart above). Surely, if you beat the market, it means that you're a “winner,” right? You must be an investing genius if you can?beat the market. And, of course, if you are ahead of your peers when it comes to your portfolio returns, you feel like a winner. As if you're?better at investing than those around you.

In my case, none of these things are accurate. I took a portfolio strategy devised by someone else and tweaked it a bit to make things fit what I hopes could happen. I'm not an investing genius, there's a good chance my place in the Grow Your Dough rankings will drop as the year progresses, and the only reason I'm beating the S&P 500 right now is due to market conditions. Things could change fast if gold keeps dropping and if real estate doesn't really make a comeback.

The Investing Race You Should Be Running

The problem with these comparisons that I'm making is that they are all against some outside benchmark. Rather than measuring my success against other investors, or against some index, I should really be measuring it against myself.

Rather than the investing race that says?I have to win NOW, I should be striving to change what it means to “win,” and focusing on the long-term. Here are two?better ways to measure whether or not I'm set up to “win”:

  • Do I have a return??At the most basic level, you “win” at investing if you have a return. Even if your return doesn't quite beat inflation (there's something you should be trying to win against), a return is still a return. If you have more money in your account than you started with, that's a good place to start in terms of being an investing “winner.”
  • Am I building an adequate nest egg??There are a number of ways to ruin your retirement, and you need to be careful to avoid them. Not investing enough is one of the ways to cause problems down the road. If you want to “win” the investing race, worry less about what other people have in their portfolios, and concentrate on whether or not you have what you need to live comfortably later.

Right now, my portfolio is ahead of the game. I have more money in my account than I started with. It's not a ton more, but it's more.

If I stick to my plan, and if I don't get caught up in frequent trading, I should be able to keep letting that amount grow. Having more than you started with means that your money is working for you. And as long as your money is working for you, and you aren't working for your money, that's a win in my book.

It's tempting to change things up in portfolio today, since it's down, but that wouldn't do me much good. I wouldn't be letting time do its work, and I'd been locking in the losses. With the investing race, it's better to see it as a marathon in which you just try to beat your own best time, rather than worrying about what's happening with everyone else.

No matter how good it feels when you come out ahead.


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