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Investing lessons from the Tour de France

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Investing lessons from the Tour de France.

The 2017 Tour de France was a sporting spectacle. Having four New Zealanders in the pro-peleton this year made it particularly exciting. The 21 stages of the race offered high drama as the best cyclists sought to overcome the demands of traversing France in their hunt for the yellow jersey. A public, high stakes competition, fought over an ultra-long distance in challenging conditions; what it takes to be a winner at the Tour de France can teach us some important lessons for investment management.

In fact, there are lots of winners at the Tour de France. The best young rider, the King of the Mountains, the best sprinter. The winners of these various titles are single-minded specialists. King of the Mountain contenders, for example, aim to be the very best on the great climbs of the race, but hope just to survive on the fast flat sprints. The best investors similarly aim to perfect their investment approach so as to generate great returns when opportunity presents, but also to survive the times when their approach is out of favour.

Of course, there is one overall winner. In 2017 this was Chris Froome, who did not win any of the other titles, nor did he win any of the race's 21 stages. Froome happily let his rivals chase smaller objectives, while keeping his eyes on the prize at the end of the 3,500km race. Half-way through the race, Froome's lead was temporarily snatched by Italian champion Fabio Aru. Froome's competitors questioned his ability, the press doubted his strength and his support waned. Froome stuck to his game plan and was ultimately triumphant. Investors with a long term focus, the ability to avoid chasing short term trends and the fortitude to endure temporary underperformance ultimately deliver winning results.

When Froome's adversaries attacked, his team, the legendary Sky, responded. When his bike broke down, team-mates gave him theirs. His strongest team-mates sheltered him from the winds, the lightest paced him up hills, and the most enduring took him safely across stage finish lines. History's greatest investors surround themselves with skilled, hard-working teams to create strong results. Differing strengths allow the team to best respond to changing conditions and challenges.

While the race itself was exciting, frankly Froome's win was somewhat boring to watch. He and Team Sky were predictable most of the time. They assumed a strong position, and executed their game plan clinically. A great deal happened around them; crashes, attacks, and disqualifications, but Sky just sat there pedalling. Outstanding investors have to be willing to be boring and monotonous in executing their plan, because there is no telling when the share market will reward their effort. After 21 days and 3,500km of racing, Froome won by just 54 seconds, adding a fourth Tour de France victory to his record. Great long term records are built with determination, patience, effort and a little luck, whether in cycling or investing.

 

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