February 26, 2023
Robin Powell

Investing is not a Race

If you had Whitehaven Coal in your portfolio in 2022, congratulations. The company’s share price grew by 241.3% from $2.76 at the start of the year to $9.42 by the end of 2022. That would have turned an investment of $1,000 into $3,413 by the end of December.

You should also be feeling pleased with yourself if you owned the energy company New Hope Corporation, whose value rose 176.5%, or Core Lithium, which closed the year up 70.8%

Missing out

There’s no question that to anyone who owned these stocks, this would have felt like a ‘”win”. Over the same period, the ASX 200 fell by 5.6%, which was the biggest drop in four years. Owning Whitehaven Coal in particular was massively profitable.

Similarly, if you didn’t own these stocks, you might feel that you missed out. It’s natural to be a bit jealous of those who have been seeing their investment grow at such an incredible rate.

There will also be plenty of people who decided that, given such stellar growth, they needed to buy Whitehaven Coal too. This is not just because the lure of fast profits is hard to resist, but because they don’t want to be the only one around the dinner table or water cooler who isn’t “winning”.

There’s no race

Stock market investing is often like this. Whenever a company surges in price, it feels like there are winners and losers.

This kind of language seeps into the managed funds world too. People talk about which funds are “beating” the market, and which are the “top performers”. It is made to sound as if there is a competition going on.

But true investing is not a competition. And it’s not a race. You won’t get any prizes for doing better than anyone else. Moreover, FOMO can distract you from focusing on the things that really matter. Even worse, FOMO can lead you to taking risks that you never should have been taking in the first place.


The only thing that matters with investing is whether you are meeting your personal goals. And that has nothing to do with how anybody else’s investments are performing. That is entirely an individual question.

Will you have enough to send your children to university? Can you afford to retire comfortably?

Those are the really important questions you should be asking.

The temptation, of course, is that it’s easy to think that investing in a stock that has soared in value will make all of these things easier. If your money had grown three or four times in the last year, your goals would surely be a lot closer.


That is, however, the kind of thinking that tempted people into losing billions by placing their money with Bernie Madoff in the 1990s and 2000s. It’s the same motivation that led thousands of people to buy bitcoin back in 2017 before it crashed.

Of course, not every top-performing investment is a Ponzi scheme or a price bubble, but thinking about investing in terms of getting “the best” return is inherently risky. There are  two reasons for this.

The rear-view mirror

The first is that it is always based on hindsight. People gave their money to Madoff for the same reason that many piled into bitcoin: they saw how good past returns were and simply extrapolated that into the future.

That isn’t, however, how markets work. Spectacular short-term returns are never repeatable indefinitely. People in Madoff’s Ponzi scheme found that out in the hardest way possible.

Secondly, chasing performance inherently requires concentrating on your investments. Whitehaven Coal may have massively outperformed the index in 2022, but to see all of that out-performance you would have had to be invested in just that one stock.

That may seem fine while the stock is going up, but what happens if the price crashes? You are fully exposed to that as well.

Slow and steady

If, however, you know what your goals are, and the kind of steady returns you need to reach them, you can avoid getting caught up in seeing investing as a competition that you need to try to “win”. You can diversify your portfolio, use low-cost products for reliable returns, and be confident about your long-term prospects.

Aesop may have written the fable of the hare and the tortoise 2,500 years ago, but he could just as easily have penned it for the modern performance-chasing investor.

Flashy, eye-catching returns may seem appealing. But, when it comes to investing, the surest way to reach your goals is really through a boring, plodding approach with your eye on the destination.

One final thing to note: at the time of writing, shares in Whitehaven Coal are down more than 20% since the start of this year.

Are outperforming fund managers skilful, or just lucky?

To what extent is short-term outperformance down to manager skill? The manager, of course, is likely to say it is down to skill. Similarly, when a manager underperforms, they will often blame bad luck.

June 07, 2023