THREE CRITICAL PRINCIPLES OF INVESTMENT SUCCESS

If you didn’t see Emmitt Smith’s NFL Hall Of Fame speech a few weeks ago I highly recommend you have a look.  There are number of takeaways from this great speech, but one section really jumped out at me:

“Now let’s talk about some specific steps I took that were critical to sustaining my vision. There’s a difference between merely having a dream and fulfilling a vision. Most people only dream. I only not had my childhood dream, but I did everything in my power to fulfill it.

For example, I wrote down my goals and how I was going to achieve them because Dwight Thomas used to tell us, It’s only a dream until you write it down, and then it becomes a goal. By the time I was 20, I wrote, I want to play in the Super Bowl, be the MVP, become the all-time leading rusher, and finish college, because I promised my mother I would.

Over the course of my career, all of those things came to pass, and I know that writing down my goals was an essential strategy.

Another critical principle is consistency. Consistency shows value. Consistency is necessary for trust, durability and longevity. You have to show up every week no matter how difficult the game or life might be.

I not only showed consistency, but I did everything in my power to be the best that I possibly could. Over time consistency will allow you to achieve your goals.

Next is balance. As I stated earlier, balance was the key to our success. We had all the balance you could possibly have. I exhibit balance in my personal life when I put my family in its proper place, and that is number one.” (emphasis added)

These are excellent comments that are not only applicable to football, but can really be applied to anything in life that you want to succeed at.

1) Writing down your goals and keeping yourself accountable is an excellent way to instill discipline.  In the investment world accountability and record keeping are vitally important.  If you’re not accountable for your mistakes you’ll never learn from your mistakes (see John Meriwether).  If you don’t create goals and track those goals you have no way of measuring your performance.  And at the end of the day performance is all that matters on Wall Street.

2) Consistency.   I’ve discussed this before, but consistency is key to any good trader or investor.   Investing is a game of small ball.  As I’ve said before:

“It is a game of repetition where hundreds of small actions result in one larger result.  But most importantly, it is a game of risk management.  It is not the home run hitter who wins in the long-run.  Rather, it is that strategist who devises the best long-term plan who ultimately wins.   While hitting home runs is sexy it is rarely a recipe for success in the investment world.  Aim high, but play small.  Over time, good risk management and patience wins.  Power is no substitute for precision and patience.  The same is true in the world of investing.”

3) Balance.  This is applicable in many ways to the investment world.  I am a firm believer that you should be balanced in all facets of the investment world.  A multi-strategy approach increases the likelihood that you always have a strategy to fall back on.  Because all markets are intertwined a balanced understanding of all markets is preferable to understanding just one market.  But perhaps most importantly you must balance investing with your real life.  No one should live to invest.  You should invest to live.