Want a Better Fiscal Life? Ride with the Pack.

BikeAnyone who has ever been in a road bike race or gone on group rides knows the power of riding in a pack.  For those who haven’t, bicyclists tend to ride very close together when they are going long distances.  The reason is that the group of bikes will actually change the headwinds, reducing the amount of effort needed to go a certain speed.  Normally, like a flock of birds, a rider will be the lead rider for the pack.  This rider will be heading into the headwinds and therefore putting out more effort than those behind her.   When she gets tired, she will drop back into the pack and let someone else take a turn at the front.  The stronger riders normally spend more time leading the pack, but everyone gets a turn.

The power of the pack extends even to the person in the lead, however.  The  pack actually changes the wind patterns, such that there is a mass of air that moves with the pack, breaking the air ahead of the pack and creating a slight force forward.  In the frame of reference of the lead rider, it will seem like there is less headwind than he would see if riding alone.  The whole pack can therefore ride faster as a pack than they could alone.  In a bike race some strong individuals will break away from the pack temporarily, but the pack will always catch up to them if given enough time (watch American Flyers for more on bike racing).  There is just no way one person can ride faster than the pack due to the way they change the winds.

The same holds true for those who fall away to the rear of the pack.  Once they fall back a certain distance, about 10 feet, they are no longer in the wind stream of the pack and are no longer being pushed along.  It is very difficult to catch up to the pack if you fall behind since you must put out more effort than they can.  Fall more than a few lengths behind the pack, particularly if you fall back because you are tired, and the pack will sail on without you.

If you invest, it is like you are riding with the pack.  You still need to put in some effort, but your accounts can grow faster than they would if you were just stuffing the money in your mattress.  You are using the efforts of others, in addition to your own efforts, to grow wealthy.  Your pack will gain members as you go, as your money compounds, and eventually you will be growing wealthy much faster than you thought possible.  For example, if you start putting away money in your 20’s, you can easily become a millionaire when you are forty.  You will then become a $2 million-millionaire far faster than it took to gain your first million – when you are 50.  You could have $10 million by the time you are ready to retire.  As you get the momentum rolling, things happen quick.

Going into debt is like falling behind the pack.  You need to work even harder than those in the pack to catch back up.  While you are working harder to catch back up to the pack, those in the pack are adding members and gaining speed.  If you fall deeply enough into debt, you will never be able to catch the pack again.  Eventually you will tire out and stop at the side of the road, out of energy.  While someone who has saved and invested will find it very easy to make his second million, you will be working every hour you can just to pay your bills.

So, get with the pack early and stay there.  While it is tempting to slack off your peddling and drop back a bit, it takes twice the effort to catch back up.  If you fall far enough behind, you’ll see the pack ride off and leave you in the dust.

Your investing questions are wanted.  Please send to vtsioriginal@yahoo.com or leave in a comment.

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Disclaimer: This blog is not meant to give financial planning or tax advice.  It gives general information on investment strategy, picking stocks, and generally managing money to build wealth. It is not a solicitation to buy or sell stocks or any security. Financial planning advice should be sought from a certified financial planner, which the author is not. Tax advice should be sought from a CPA.  All investments involve risk and the reader as urged to consider risks carefully and seek the advice of experts if needed before investing.

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