By Miles Clyne
Being a wannabe competitive cyclist in my age group, I read anything that could help me improve my performance (note I don’t say I’ll do anything to improve my performance, but I’ll read anything). In his book The Hidden Motor: The Psychology of Cycling, Veltkamp talks about how mind training can make you ride faster. I think this is relevant to almost everything we do, including investing.
So how do you accelerate your investment success?
Veltkamp stressed that motivation is psychological. Like any competitive activity, investing also requires motivation. Psychologists usually divide motivation into two classes: intrinsic and extrinsic.
Intrinsic motivation refers to internal reasons for being motivated: riding for the joy of it or for the enjoyment of a better overall time on a regular training ride. For investors, intrinsic motivation will be as unique to them as the cyclist. More savings might make you feel more confident, successful, and independent or any number of other emotional benefits.
Extrinsic motivation is about external reasons for cycling: for example, the potential for prize money or glory. Regarding investing, extrinsic motivation may be: the ability to have a solid retirement, buy a home, and fund an education for my child, or bragging rights on a stock that soared.
Like cycling and many other activities, you can participate alone or with others. Veltkamp provides the evidence that most often you perform better within a group. When it comes to investing I think the same logic applies. There are lots of ways to work with others. Engage your family and friends, form or join an investment group, work with a professional, join discussions on blogs or take courses.
Psychology plays a big role in riding down hills for many cyclists, including professionals. The fear of big descents can hinder good results or even ruin the enjoyment of riding. Speed equals greater risk. This is pretty much akin to the fear of your portfolio falling in value. Just like learning to ride down hills, or conquering any fear, you need to learn how to take the stress out of any key emotional challenge. Understanding how to minimize risks is critically important in maximizing your potential.
How can you crank up your performance using your hidden motor in just 15 minutes?
1. Ask yourself: Why am I investing? What is it really that you to get out of investing? What gives you the most pleasure? Take three minutes to do this. This defines your intrinsic motivation. Keep it in mind. Always.
2. What is the one thing you really want to do in your investing in 2017? Limit yourself to three main goals. What are you willing to do (and not do) in order to get there? Spend four minutes on this. Congratulations, this is your basic 2017 investment plan.
3. This next step may sound corny, but spend eight minutes on this focusing exercise. Sit straight and relax. Now focus on your breathing for the full eight minutes. Pay attention to how your breath moves in and out. Your thoughts may wander; if they do, bring the focus back on to your breathing.
4. A mindfulness exercise, when done repeatedly, will train you to sharpen your focus. When you feel your focus drifting, having practiced this mindfulness technique, you will be able to shift your thinking back into focus quickly, whether it is on investing or staying between the lines on a sharp corner of a steep hill.
I’ve heard the comment over the years that investing is a combination of art and science. I think it is more a combination of psychology and math. Regardless of how good the math looks with an investment, the ability to stick with a winning strategy still requires the right psychology. The cyclist can have the best training program, but if they never figure out how to conquer their fear of riding down hills, they will never know or experience their true potential.