IRONMAN® Investing
“The first rule of compounding is to never interrupt it unnecessarily.”
— Charlie Munger
After focusing on endurance cycling events for the past several years, I recently returned to my triathlon roots by competing in an IRONMAN event back in my home state of Wisconsin. Over more than 20 years of competing in these events, I have come to appreciate how similar completing an IRONMAN is to being a successful lifetime equity investor. Both require preparation, patience, discipline, and a willingness to endure difficult times. But the single most important discipline comes down to the simplest of ideas: NOT STOPPING.
That may sound easy enough from the comfort of your living room. But several hours into a 140.6 mile IRONMAN event, it becomes a much more difficult proposition.
The weather may turn ugly. Your goggles may get knocked off during the swim. You may get a flat tire during the bike. Your legs may cramp during the run. Your body may start to hurt in ways it has never hurt before. You cannot control any of those things. You can only control how you respond.
You adjust your pace. You take in fuel and liquids. You walk if you need to. You keep the finish line in mind and continue making progress toward it. One difficult mile can never erase the months of training that brought you there, so I often repeat to myself “this too shall pass.”
The same discipline applies to lifetime equity investing.
Compounding is the magic that allows the returns on our investments to generate returns of their own. Given enough time, that growth becomes far more meaningful than it appears in the early years. But selling equities in response to fear (or piling into hot sectors out of greed) interrupts that process.
Worse yet, it leaves us with a much more difficult decision: when to get back in. Nobody can reliably make both calls. Least of all me.
Over our investing lifetimes, we Spartans must expect recessions, wars, frightening headlines, and significant temporary declines in our portfolio values. But rather than trying to predict or avoid them, we build a Plan that anticipates them and gives us the confidence we need to endure them.
Our entire investment process is built on that premise: we define your most cherished goals, engineer a broadly diversified portfolio that gives us the highest probability of achieving them, and maintain Bear Market Reserves for planned withdrawals. Just as an IRONMAN athlete prepares for months or even years before race day, we prepare you for market downturns long before they test our resolve.
And note Charlie Munger’s clever use of the word “unnecessarily” in his famous quote. Periodic disciplined rebalancing, retirement withdrawals, and making adjustments when your family’s goals change are all part of following the Plan. But abandoning it out of fear is something else entirely.
Lifetime equity investors do not need to win every month, every quarter, or every year. We simply need to commit to being patient owners of the World’s Great Companies and allow compounding to continue its work. This gives us the best opportunity to achieve the goals that brought us to the starting line in the first place.
Once we Plan Wisely, Invest Intelligently, and Diversify Broadly, our most important discipline becomes Ignore the Noise. In other words: NOT STOPPING. Simple advice, but often difficult to follow. No matter how ugly the markets may get, our most important role is to help you maintain your discipline to ensure you eventually cross the finish line.
As we head into the fourth quarter and the Holiday Season, we wish to thank you, as always, for the privilege of serving as your family’s Trusted Advisor.
