The bottom line is that if you cannot resist frequently checking your portfolio’s value, you should be more conservative because you will be feeling the pain of losses more frequently. Feel enough pain, and even the most well-thought-out investment plans can end up in the trash heap of emotions.
There’s another important message here. The less you watch and/or read the financial media and the less you pay attention to economic and market forecasts (since they can cause you to imagine pain), the more successful investor you are likely to be!
My long experience working with thousands of investors and hundreds of advisors has taught me that these six strategies are the keys to being a disciplined investor, greatly increasing the odds of achieving your goals. But I promised you seven.
The seventh comes from Meir Statman, finance professor at the University of Santa Clara: “Start keeping a diary. Write down every time you are convinced that the market is going to go up or down. After a few years, you will realize that your insights are worth nothing. Once you realize that, it becomes much easier to float on that ocean we call the market.”
Napoleon, perhaps history’s greatest general, observed: “Most battles are won or lost [in the preparation stage] long before the first shot is fired.” That advice applies to investing as well.
Now that you have the seven keys to being a patient, disciplined investor, you have the knowledge needed to prepare to win the inevitable war for control that occurs between your head and your stomach whenever bear markets occur or sound investment strategies deliver poor results. Forewarned is forearmed.
Larry Swedroe is the director of research for The BAM Alliance, a community of more than 140 independent registered investment advisors throughout the country.