Lack of disciplined investing causes most investment losses. It's that simple. If our investment program loses money over a period of years, we should likely blame ourselves, not the economy, bad luck, lack of knowledge or failing share prices. Time fixes these challenges.
The biggest single reason for investment losses: lack of disciplined investing. That's one element time alone will not fix.
Why discipline and investing are mutually exclusive to so many people who have little difficulty in being disciplined about other things is a puzzle. It's not too difficult to be disciplined about games, for instance. Bending the rules is far less satisfying than playing the game as it's supposed to be played.
So why do we have so much trouble with disciplined investing? Why do we so often think our way of doing things, or our ideas, should be better than the very simple rules that govern successful investment programs?
You just have to look at the numbers of people who lose, or whose return is dismal, to be sure of one of two things: investing is a scam, or a large number of people get it wrong. Why should that be, when the rules are really quite simple?
One of the problems with discipline is that no one else can tell us how to develop it. That's something we have to do for ourselves. But maybe it helps just to know in advance that disciplined investing seems to be so difficult for so many people. At least, we can be prepared for that lack of discipline which, in hindsight, we all recognize and regret.
There are only a handful of rules that are essential for long-term investing success. One is proper diversification in keeping with your age. Another is regular rebalancing, a simple method for taking some profits and reallocating the capital to lagging investments (assuming you made reasonable choices in the first place). There are a few others, of course, but they have less to do with choosing the right investments than you might think.
Patience is an important attribute, as is confidence in your decisions. Confidence may sound ridiculous to the novice investor who understands little. Just take the time to learn about these simple rules and you will see the mathematical certainty behind some of the key ones. When you do, you will gain all the confidence you need to weather the rough patches that will inevitably come.
With confidence, you have everything you need. It will allow you to bring discipline, determination and patience with you to the table.
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