Your investment behavior in times of stress is an important determinant of success or failure. Successful investors develop and practice investment discipline in their everyday activities. With so many distractions, you may find it difficult to stay focused on what it takes to succeed. By forcing yourself to do the things you know must be done to be successful, you have a much greater chance of success.
Developing investing discipline means overcoming your natural urge to do what is quick and easy or fun. It takes time and practice to utilize investment discipline. However, the more you practice doing what is right, the better investor you will become. With practice and time, you will develop the confidence and self-esteem of a disciplined investor. A time will come when you listen to someone espouse some investment idea and you will realize how foolish it is even if it is put forward by a supposed expert in the field.
Many investors lack investing discipline, as they are lazy, greedy and think only of the short term. The latest news event, hot tip, or next “big thing” becomes their latest distraction. They speak of placing the next big bet on a stock. Yet they do not follow a disciplined approach to their investing decision. Rather, they take the easy way using their gut feel or jumping into the latest hot stock mentioned in the news. Their lack of discipline leads them to making poor investing decisions. As a result, they lose money.
If you can force yourself to concentrate on what must be done, whether you feel like it or not, your success as an investor is vastly increased. Investors who employ discipline to carry out the necessary research and analysis steps are way ahead of those who take the quick and easy approach.
A search for “self discipline” on Google generated 8,390,000 possible hits, while a search for “easy and quick” generated 161,000,000 possible hits. For every one-person seeking help regarding self-disciplined, there were 19 people looking for the quick and easy answer. Several studies show that those investors who follow a disciplined approach have greater success than those that do not. If you sustain your investment discipline on a regular basis, your chances of winning in the stock market increase accordingly. The others will be losing their money, possibly to you.
The question you have to ask yourself is “Are you willing to put in the effort to become a disciplined investor? Or, are you satisfied with your current life and financial future. If you want the financial future you deserve, it is there for you to take. All you have to do is decide you want it, apply the necessary discipline to your investing and it will become yours.
Here are a few rules to follow if you wish to develop and sustain your investment discipline:
- Investing discipline must be learned and developed, if you are to achieve your financial goals. Think about them each day.
- Successful investors force themselves to overcome the distractions and focus on what must be done, even if it is hard to do. If feel yourself being distracted, stop what you are doing to get yourself back on track.
- The unsuccessful investors allow themselves to be distracted by non-important events and do what is fun rather than what is necessary. If you want to have fun, then go ahead and do it. Just do not base your investment decisions on what was easy.
- Whenever you practice investing discipline, you become a better investor. Each time you are making an investing decision practice what you know is right.
- Be able to articulate your investment discipline in simple, yet clear rules. Many investors write them on a simple card that they keep with them.
Each successful investor has their own set of investing rules that they follow very carefully. This investment discipline is what makes them successful. Once you have a well thought out set of rules that work for you, it will be up to your investment discipline to use the rules as described. Do not waiver, unless you are changing the rule for a good reason. Your stock portfolios will appreciate it.
If you wish to learn more on investing with discipline I suggest reading The Disciplined Trader: Developing Winning Attitudes by Mark Douglas. Controlling ones attitudes and emotions are crucial if you are to be a successful trader. An important read for all investors and traders.
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