The Discipline of Investing

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  • 22 Feb 2023

Do you know the major difference between a successful and unsuccessful investor? Successful investors are disciplined! Their investment decisions are not driven by greed, fear, and emotions. They know how to react when the market turns volatile. Well, investment discipline isn’t easy. Despite knowing all the factors that can lead to losses, many investors react emotionally to market moods. Most times, investors don’t even follow the long-term investment plans. So, If you haven’t built a disciplined plan yet, here is your opportunity to start working towards it!

Many investors talk about having discipline in investing, but not all the investors follow it. Either a lack of knowledge or procrastination prevents us from inculcating discipline in investing.

Many investors after starting their investment journey get excited when things work in their favour, and they hold on to their investment because the stocks react positively. But, why not have discipline at all times? Why not keep your investments in such a way that work for you at all seasons and all times. This is where discipline matters the most!

Investment is just like life- it is a journey. If you want to go for a vacation, you don’t just get up and go one day. To get the most fun out of your vacation, you plan ahead and prepare accordingly. A planned journey makes it orderly, peaceful and happy. Same is true for your investments!

Your investment will work for you only if you plan it well. The world-famous investor Warren Buffett once said that "The most important quality for an investor is temperament, not intellect." Buy-and-hold investors need to have a specific temperament, and they need to operate in a disciplined manner. They have to rebalance their portfolios periodically.

Discipline in investing should be maintained irrespective of the market movements. You can't say, “This decline is so painful; I can’t put more money in stocks now.” You won’t be successful if you don’t stick to the discipline you have planned for your investments.

Let's look at how financial planning differs with people in different life stages.

In the world of investing, emotions can be your enemy.

  • During bullish markets, it's greed and envy

  • During bearish markets, it's fear and panic

Such heavy emotions can cause you to earn returns persistently below the returns of the assets you own. These can have outcomes via a rear view mirror, i.e., investors tend to buy more after a good performance and tend to sell low after a poor performance.

Warren Buffet also says that "The most common cause of low prices is pessimism. We want to do business in such an environment, not because we like pessimism, but because we like the prices it produces.”

Those with disciplined investing end-up making the most of all market cycles because their focus is to make profits, and they are not emotionally driven.

One of the biggest mistakes investors make is changing their investment strategy at unexpected times. Don’t second-guess yourself; this may lead to high losses. In fact, to be a successful investor you need to follow some strategies consistently, and one of the most important ones is to have a long-term view!

Many investors tend to buy high and sell low because of their short-term views; however, wealth creation requires a long-term view.

If you are going to pull out of your investments within less than 5 years, then you are not giving sufficient time for your money to grow.

Alternatively, if you invest for a time frame of 10 years, which is a long-term, you give your investments the time to perform well. In long-run, you can avoid the negative effects of short-term market volatility. You may choose to invest in high-risk investment options for the long term. Many people think that risky investment options like stocks and equities can be a place to earn quick money. This belief is totally wrong. Expecting quick gains from such options may lead to quick losses.

A study conducted by J.P. Morgan Asset Management using data of the S&P 500's largest moves between 31, Dec 1993 and 31, Dec 2013 showed that staying invested for all 20 years would have given a return of 483% for investors of the broad-based index.

It stated that missing 10 biggest moves up in these time spans would have cut your return to just 191%. Even the 30 best days in a 20-year period, would have given you returns less than 20%. So, the whole point here shows that staying invested in a disciplined way reduces your risk of missing out on the big gains.

Check the 7 important points that cover the broad areas in which financial planning can be undertaken.

Today, the life expectancy of people has increased. So, you need to create a plan that will cover you at various life stages. Hence, a disciplined investment approach will help you to achieve long-term financial needs without depending on others.

A young person can allocate more funds to high-risk options like equity and can stay invested for 25-30 years. And then, he can slowly move to low-risk options that provide you capital protection.

Options such as the Systematic Investment Plan, in both mutual funds and stocks, offer a disciplined investment style.

If you look at the past 40 years of the economic cycle, there have been many ups and downs. Movements similar to those are expected in the upcoming years too. The best approach to overcome the effects of market volatility is to follow a disciplined long-term investing style.

  • Balance Your Financial Plan

Balancing your portfolio is an important part of long-term investments. Your need might change every time, and to fulfil such diverse needs, you should keep updating and balancing your portfolio. But, make sure you stay invested until each goal gets fulfilled. This is how balancing plays an important role in your portfolio.

  • Diversify For A Smoother Ride

Diversification is the key to balancing the risk in your portfolio. When you invest in various asset classes and instruments, you tend to earn optimum returns on investments with minimum risk. Suppose, if one asset in your portfolio fails to perform in a particular cycle, others in the portfolio will balance the risk. This means that the risk of your portfolio is not limited to just one asset.

  • Maintain This Portfolio Through All Market Conditions

As you know, the markets keep changing, so you should always maintain roughly the same asset allocation that is suitable for all market conditions. This where rebalancing works. Rebalancing helps control portfolio allocation. So, make sure that you do annual rebalancing of your portfolio.

  • Keep Your Emotions Out

A true sportsman is emotionally strong. Investors tend to let emotions cloud their judgement when their assets don’t perform as per their expectations. But, this will only bring your confidence down. Fear and emotion are two bad traits that you need to keep out of trading.

During a bullish market, investors hear stories of fabulous returns being made, which leads to buying shares of unknown companies. On the other hand, in a bearish phase, investors panic and sell their shares at rock-bottom prices. Such steps may lead to a loss. Therefore, once you plan to trade, make sure you keep your emotions out.

  • Don’t Change The Allocation Because Of Recent Market Trends

If you have invested for your long-term needs, stay focused. If you’re not willing to hold an asset for the next 10-15 years, then you shouldn’t own it now. When you invest for long-term, it doesn’t matter what’s going on in the markets today. In the long-run, your asset will give you good returns.

  • Avoid The Herd Mentality

This is the most undisciplined way of investing. Many investors get highly influenced by other investors and tend to invest in the same stock. But, this strategy can backfire in the long run.

So, the next time you hear about some stock doing well, go back, do your own research and then decide.

  • Monitor Rigorously

This is one of the most important parts of disciplined investing. We live in a world where any event can occur anytime and have an impact on the financial markets. Therefore, constant monitoring of your portfolio can keep you aware, and accordingly, you can make changes to your portfolio. You may take help of a financial planner In case you are not able to timely review your portfolio.


Remember, all disciplined plans have actually worked. Since our childhood, we are told to follow discipline in our day to day life, but most of us don’t follow it. In the world of investment, if you want your money to shine in the future, start inculcating the habit of discipline. Make sure you follow a disciplined investment plan and stick to it!

Happy investing!

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