This week marks ‘Winter Ascot’, the final event in the racing season at the storied track, where horses will traverse tricky conditions and face numerous hurdles. Ultimately, the winners will be those that adapt to conditions and outlast their competitors.
If this sounds familiar, it could be because these same principles are what make a good investor.
In the summer flat season, horses face a much easier time. Races are shorter, conditions are better and the winners are generally based on which horse is fastest to the finish.
In investing terms, this is akin to when market conditions are perfect. Post-financial crisis, pretty much everything did well as an abundance of cheap debt made conditions relatively smooth for businesses. The winners were copious and investors could ride the wave. Everyone got to a finish line at a good pace.
Fast forward to today and things are different. Ongoing geopolitical risks, rising volatility, overvalued stocks dominating global indices and far-from-ideal monetary policy are all concerns that could leave investors coming up short.
This is why the comparison to the Winter Ascot meeting is far more appropriate. To win, horses must be able to deal with a number of challenges.
What if the ground softens due to a downpour? Perhaps there is an unfavourable headwind? What if a horse falls and impacts others in the race?
But the most striking similarity comes from the nature of jump racing itself: these are long, punishing distances. Success comes to those who can stay the trip.
The temptation in today’s markets is to chase momentum, but this has been fraught with danger. In recent days, markets have been wobbling as investors have grown concerned about the longevity of spending on artificial intelligence.
Nvidia’s results kept markets upright, but it feels as though the rain is pouring and any slip-ups by these mega-caps could spell disaster.
Perhaps then investors should look to emulate a great jumps horse. The best staying horses win by conserving energy and peaking at the right moment. Good investing works the same way.
Rather than chasing returns investors should adapt to the conditions. Instead of buying into the momentum-chasing tech stocks, looking elsewhere for the less glamorous (but far more durable) stocks may be the best way to go.
Indeed, this week the Bank of America survey showed fund managers are looking away from the US, with other areas expected to outperform in 2026, under the assumption that grey clouds are building.
After all, despite the similarities between horse racing and investing, there is one thing that investors should steer clear of – taking punts.
In racing, spreading your bets is usually seen as a sign of indecisiveness. In investing, spreading your bets (known as diversification) should be the foundation of any portfolio.
As you read this I am on my way to Ascot as a punter, but my investment portfolio resembles more of the qualities of the horses I will be backing, rather than the attitudes I have at the racetrack.
And although I will likely only pick one horse to win in each race, I am aware that I am gambling. My portfolio is far more spread out – that’s money I can’t afford to risk on one bet.