Olympic Games lessons for investors

Even if sport is not your cup of tea, there is something magical about the human stories of the Olympics that can turn the most stony-faced observer into a cheering lunatic in living rooms across the country for these two weeks, every four years.

As athletes from all over the world descend on Paris for the 2024 Olympics our minds wander back to some of the inspirational moments from past games. Most of us remember Cathy Freeman taking out gold in the 400 metres in Sydney and Kieren Perkins winning from Lane 8 in Atlanta but few may know the story of Ashley Moloney, an Australian decathlete who won bronze, and Australia's first-ever medal in the event, at the 2020 Games in Tokyo.

If you're not familiar with the decathlon; it is a brutal, multi-discipline track and field competition run over two days. It features long jump, high jump, 110m hurdles, discus, javelin, pole vault, shot put and running over 100, 400 and 1,500 metres.

A points-based system determines an athlete's score for each discipline based on a set of formulas and benchmarks resulting in an overall winner achieving the highest total score.  

If you're still with me and wondering how on earth we'll tie this back to investing; stick with me.  

Succeeding in the decathlon does not require you to win every single discipline and in fact, no man has won more than four of the 10 this century, while Estonian, Erki Nool failed to win a single discipline on his way to claiming the Gold Medal in 2000.  

Instead, the key to success in the decathlon relies on a well-diversified portfolio of skills and a focus on improving areas that will result in maximising their total potential score.  

Investors can apply these same principles to their portfolio. We are all aware that diversification is a crucial consideration for risk management but knowing how to structure your asset allocation to deliver the best possible risk-adjusted return or even understanding the risk profile that applies to you can be a more difficult undertaking.  

Having an investment timeframe in mind can help you with both of these. Take a look at the table below which highlights the estimated number of years of negative returns over a rolling 20-year period based on different risk levels. 

If you invest in a correctly allocated portfolio that aligns with your investment timeframe then you will give yourself the best opportunity, on the balance of probability, to achieve the best risk-adjusted return - or at least the long-term average for that risk profile.  

Now back to Ashley Moloney...  

Heading into the final event of the decathlon, the gruelling 1,500 metres, he needed to remain within a few seconds of his nearest opponent to cling on to a medal position. By no means was this his pet event and after two days of hard competition it looked like heartbreak was on the cards.  

But what no one expected was that the other Australian in the competition, Cedric Dubler, and Ashley Moloney's mentor-cum-training partner would sacrifice his own race to help dictate the pace and push Moloney across the line in a personal best time. It was an incredible act of mateship with Dubler recognised by receiving the inaugural Cecil Healy Award for Outstanding Sportsmanship from the Australian Olympic Committee.  

We can only hope that our Olympians at these Games can make us as proud.  

If you'd like help selecting the right style of portfolio for you check out our free statement of advice quiz. It will show you which ETF portfolio may best suit your goals and investment timeframe.