Grit and Investing
by Charles Cheng, CFA
“Grit” has become a popular buzzword in recent years pertaining to personal development and life success. This is due to research and a popular book authored by Dr. Angela Duckworth titled “Grit: The Power of Passion and Perseverance.” Her studies showed that long term success was much more correlated with character traits of resilience and perseverance rather than with innate talents like IQ. While success in life and success in money management are two different things, it is pretty easy to see how the same can apply to investing.
Successful investing is all about consistently getting good returns over long periods of time. The power of compounding magnifies returns where small differences in starting capital and time invested can cause huge variations in the future. It takes discipline and resilience to consistently save money to invest and to stay invested in the markets through ups and downs, losses and missed opportunities. If one stays out of the market for too long after taking a large drawdown or missing a big rally, the difference in their wealth at future point of time would be much greater than whatever they missed in the short term. But if one persists in staying with their investment plan, the rewards are significant.
So, what are the lessons from building grit in real life that we can apply as an investor? Here are some actions that investors of any level can take to increase their resilience:
Define a long-term goal for your investing such as a level of wealth before retirement, that you can always keep in mind in any situation,
Define smaller goals and habits that will help you reach your long-term goal,
On a regular schedule, evaluate whether your current actions are helping you get closer to your goals or not,
Try your best to ignore your feelings regarding the performance of your investments if they are not relevant to the achievement of your goals going forward,
If you are implementing an investment plan, don’t leave it unfinished. Either follow through completely or come up with another robust plan that fits your needs,
When you achieve anything that takes you closer to your goals, no matter how small, celebrate your actions that lead to those successes!
Mr. Cheng is a managing partner at a Hong Kong based independent private investment office. This article reflects his personal views and not his firm’s and should not be viewed as an investment recommendation.
鄭先生為可承資本，一家總部設於香港的獨立投資辦公室之董事合夥人。 這篇文章反映了他的個人而非公司觀點。 該文章不應被視為投資建議。