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As author Morgan Housel says, “The most important investing question is not, ‘What are the highest returns I can earn?’” Instead, “It’s, ‘What are the best returns I can sustain for the longest period of time?’”READ THE ARTICLE
The power of paced performance: When it comes to the training schedules of professional endurance athletes, the majority of their time is spent barely pushing to their limits, and more so maintaining a leisurely pace. In competitions, these professionals might perform at their highest intensity, but as the research says, in practice, “you tend to build the best athletic machine when longevity is favored over intensity.” It’s all about sustainability.
How does this affect your money? In the realm of investing, the same theory holds true. One of the biggest secrets to successful portfolio management is: “Average returns for an above-average period of time leads to magic.” However, in today’s market, we’re seeing the flip side of this. Throughout the past five years, investors felt like champions as they watched their returns soar higher, but now, they’re burnt out, both financially and psychologically.
The tortoise and the hare: In Housel’s words, “...you will likely maximize investment gains over your lifetime if you go out of your way to not maximize annual returns, instead focusing on merely good returns that you can sustain for as long as possible.” Simply put? Sometimes slow and steady wins the race.