One of the biggest misconceptions in life is that in order to achieve any meaningful success, you’ve got to be the kind of person that gives it 120% for 30 years in a row.
Don’t get me wrong – it’s really important to be good at what you do. So is being consistent.
But the reality is that most high achievers aren’t grinders working 100 hours a week for decades on end.
The key to their success isn’t outworking everyone else. Instead, it’s their ability to elevate their game at critical junctures. Call them clutch players if you will.
Take getting into a great university.
The name of your alma mater will stay on our CV for the rest of your life. Ditto for the network you build during those undergrad or MBA years, which will open countless doors over the course of your career.
But the grades you achieve in junior high make zero difference. No one cares about that accidental C- in grade 10 English.
The only thing that matters is the 18-month stretch before your graduation.
It’s getting those straight As in senior year. Knocking it out of the park on your SAT. Notching up a couple of good extracurriculars. And yes, getting professional help with application essays.
Once you get into a good school, it’s the same story. A mid-term and a final will often determine 80% of your grade. In some schools, the outcome of a single year-end exam becomes the letter on your transcript.
Mess those up, and you are toast. Shine on one or two days in a semester, and you are golden, free to cruise at 80% of the effort, all while conserving energy for the next big moment.
The working world isn’t any different. Once you’ve landed a job, it’s a bit like flying a plane.
Shine as much as possible during take-off. Then, once you’ve reached cruising altitude, you can enjoy long stretches of time when “good enough” will do just fine.
And then, the time comes to really push the boat out. It may be your ascension to the partnership. Navigating the MD promotion process. Edging out all other candidates for a big promotion to the C-suite.
Good luck to you if you’re approaching that period exhausted from a period of long days and late nights – because the competition will be fresh, rested, and ready for a fight.
Once again, no one cares about your accomplishments last year or the one before. The only question is “What have you done for me lately?”
Rising To The Top
In investing, there are just a couple of things you need to do to elevate your game to the very top.
It all starts with the time you begin investing in the first place.
For someone who starts at 21, the value of the contributions they make in the first 10 years will dwarf the impact of money invested for the next 30:
That’s right, it’s that one simple decision to open a brokerage account – but the moment you snooze is the moment you lose.
Once you’ve got the ball rolling, it’s all about making sure you’re not getting ripped off.
Leave your investments with that friendly financial advisor down the street, and you are pretty much guaranteed to lose 1%+ of your total portfolio value every single year, regardless of performance.
Oftentimes, the same is true of the “default” option in your employer’s pension plan.
One percent of your hard-earned money. Every. Single. Year.
In other words, whatever you do, don’t let investment fees kill your dreams.
The third big moment is the time you determine your asset allocation.
Choose 100% equities, and you are probably going to end up with long-term nominal returns in the 8-10% range.
Go with the (relative) safety of bonds – and those returns decline to about 5%. In case you’re not aware of the impact that might have on your portfolio, I suggest you take a long hard look at the chart below:
And finally, there’s the amount you contribute.
Starting at $100/month is a great move for someone who is at the very beginning of their journey. But it is a MUCH BETTER idea to anchor your contributions to a % of your earnings.
You don’t need to be a personal finance blogger to understand that 10% of $100k is a far bigger amount than 10% of $30k.
What makes this a massive win-win is that every time you get a raise (which you inevitably will), your contributions AND your disposable income go up – so you get to have your cake and eat it, too.
And that is the end of it. Your ability to rise to the very top of the investing game hinges on making just four correct decisions – and then doing absolutely NOTHING for decades on end.
No one figures out the game the very moment they start playing it. But the good news is that while you can’t reverse the mistakes of the past, it’s never too late to elevate your game.
As it happens, the beginning of 2023 is the perfect time to do so.
As always, thank you for reading – and happy investing.
About Banker On Fire
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Banker On FIRE is an M&A (mergers and acquisitions) investment banker. I am passionate about capital markets, behavioural economics, financial independence, and living the best life possible.
Find out more about me and this blog here.
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