Welcome to the 133rd episode of the Alternative Investing Podcast!
In today's episode, I'll share three important lessons you can learn from MMA fighters to help you thrive despite economic uncertainties.
If you're interested in learning the similarities between the mindset of an MMA fighter and that of a successful investor, then make sure to listen to this episode!
Did you know that we can become better investors if we approach investing like we might get punched in the face?
A friend of mine, who was a very talented martial artist, and to whom this episode is dedicated, recently shared a story that stuck with me.
He narrated that when he was preparing for big competitions, his coach pulled him aside and said that he would likely get hurt when he stepped into the ring, and the real challenge was how he reacted to that pain and kept going.
Guess what? It's exactly the same with investing money.
When you invest your money, there’s always a chance that you will lose that money or make bad decisions.
In fact, it's rare to have a lifetime of investing without any mistakes or setbacks.
Right now, economic pressures are affecting investors' emotions, creating a unique situation many people haven't seen before.
So the more I learn about market cycles, the more I realise that it's hard to prepare for the future without looking at the past.
Ray Dalio, an investor from whom I have read a lot of content and watched a lot of videos, believes that everything happening now has happened before, even if we haven't experienced it in our lifetime.
He has studied over 500 years of history and seen the same patterns of economic ups and downs repeating themselves.
So while people find it hard to understand the current situation because it's unprecedented in our lifetime, similar circumstances with market forces have happened in the past.
Overall, the main idea of this episode is that we should do the work now to prepare for potentially difficult situations in the future.
This means asking yourself:
Now, let's talk about three lessons that compare preparing for a fight as an MMA fighter to succeeding as an investor in the current market environment.
Why Preparation is the Best Line of Defense
The first lesson is preparation is the best line of defence.
What I mean when I say that is I’m encouraging you to stress-test everything as an investor. We already know inflation is on a roll, interest rates are rising, and prices are likely to take a hit.
So, by asking questions and considering potential negative outcomes, such as the impact of higher debt on our portfolio and cash flow, we may be less likely to be surprised or overextend ourselves in the future.
If there’s one thing I know for sure, it's that many people foolishly believe they are great investors because they've had some short-term success. But if we’re going to think about it, even really successful investors have lost it all or taken big hits over time.
So, to prepare for potential losses or market downturns, it's important to consider how you will minimise their impact and recover quickly. This means anticipating challenges and training to handle them rather than waiting for them to happen and then trying to recover.
By preparing in advance, you can be ready to deal with whatever comes your way and move forward confidently.
Training Like an Animal
The second lesson, which is an extension of the first, is you need to train like an animal.
If you look at MMA fighters and the intense training they have to go through, it goes way beyond what the average human could endure. They do this because they need physical and mental endurance in the ring.
In the context of being an investor, everyone out there is saying you need to learn and educate yourself. But the truth is that most people learn the wrong things, skills, and mindset.
As you grow as an investor, you need to develop a good "bullshit detector" to distinguish between BS content and real investing wisdom.
Unlike in school, where learning is linear, you don't need to continue learning in a linear fashion when it comes to investing.
As you gain experience and become more sophisticated, you must identify and fill gaps in your knowledge. Rather than simply continuing to learn in a linear fashion, focus on systematically identifying areas where you are vulnerable and seeking out information to address those areas.
For me, education, understanding, and execution are the cornerstones of successful investing.
So if you can identify useful information that will help you grow your wealth and avoid distractions, you can be more disciplined in your approach to investing.
This is important for investors of all levels of experience.
Being Mindful About What You Consume
The third and final lesson we can draw from MMA fighters is that they maintain a strict diet that supports well-being.
Instead of eating anything they like, they are hypervigilant about what they consume to give themselves every possible competitive edge.
In the context of investing, I encourage you to stop listening to people who predict what will happen in the future. These people act like they know what will happen, but they actually have no way of knowing for sure.
A journalist named Morgan Housel once said predictions by those with poor track records are given out like candy. So in the context of investing, it's important to be careful about what information you consume.
Don't buy into the hysteria.
There are many strong voices and statistics out there, but the reality is that nobody knows what will happen. If you're going to listen to information about investing, focus on probabilities and don't believe that bad things will always happen.
Remember that there are cycles in the economy and that there will be growth after a downturn.
When looking for content about investing, go for people you know, like, and trust who offer insights and ideas that align with your goals and values. Many individuals make wealth building sound complicated, but it's actually quite simple.
It may not be easy, but the principles are straightforward, so avoid complexity and focus on the basics.
To wrap up, I wanted to give kudos for how dedicated and prepared MMA fighters and other martial artists are before they step into the ring.
As investors, we should be no different. If we're already in the fight, we need to be emotionally resilient and take action to protect what we have.