When you look at some of the different characteristics investors need to have in order to be successful over the long haul, discipline is one of the first things to come to mind. Do you have it?
5 Tips for Becoming More Disciplined
Point to anyone in any industry who has been successful for an extended period of time and they likely possess a high level of discipline, or the ability to control their thoughts and behavior in an effort to produce desired results.
In the world of investing and trading, a lack of discipline frequently leads to decision fatigue. This fatigue subsequently produces two major problems: (1) you’re less able to make sense of what’s going on in a timely manner, and (2) ambiguity takes precedence and your brain functions at a lower capacity.
The importance of discipline can’t be understated. And if you’re looking for ways to improve in this area of your investing career, here are a few practical things you can do to enjoy better results.
- Do Your Homework
Never invest in anything you haven’t personally researched. It doesn’t matter what other people tell you. If you haven’t done some personal homework on an investment, you shouldn’t make it.
- Develop a Plan
“Develop a written plan that lays out your investment strategy, one that reflects your personal goals and an appropriate level of risk,” suggests Austin Pryor of Sound Mind Investing. “Understand how all the parts of your portfolio fit together and the role that each part plays. Then let your buying and selling be dictated solely by your plan. You’re to be an initiator, not a responder to ever-shifting market news.”
You don’t stumble into success as an investor. Sure, you might make a lucky trade or two, but sustained success is rooted in strategic planning. Do you have a personal investing manifesto?
- Establish Goals
In addition to your investing plan, you should also establish some objectives. This should include both short-term goals and long-term goals so that you’re constantly being pushed.
“Break down your investment goals into achievable milestones,” finance blogger Miranda Marquit suggests. “Investment success is hard to come by if you find yourself constantly frustrated about your lack of progress.” While it’s okay to stretch yourself with some ambitious goals, experiencing little wins along the way will keep you engaged.
- Diversify Investments
Disciplined investors don’t get too carried away with a single investment, no matter how attractive it looks. As a rule of thumb, you should avoid tying up more than 10 percent of your portfolio value into a single stock or investment. It’s also a good idea to spread yourself out over multiple sectors so that you’re able to mitigate risk and enjoy more balance.
Diversification sometimes feels like a slow approach when there’s a particularly juicy investment you want to sink your teeth into, but it’s a safe long-term play that almost always yields better returns than chasing hot stocks to make a quick buck.
- Avoid Jumping Ship Prematurely
When an investment starts heading south, it’s tempting to pull out as quickly as possible. The problem with this approach is that you’re constantly losing money. Avoid jumping ship prematurely and most investments will steady out or swing back up.
Give Yourself a Head Start
A disciplined investor has a head start in almost every area. While we all innately possess different levels of discipline, a large component is determined by how much conscious effort you give to this area of your career. By utilizing the tips outlined in this article, you can create a strong foundation on which to build a profitable and secure future.
Author: Oliver Curtis
Hi there. I’m Oliver. I’m just a young boy from the outskirts of… Okay, that’s a lie, I’m not a young boy anymore, although I certainly feel that way at heart.