Investing Discipline

 

The traditional samurai code of Honour, Discipline and Morality is known as Bushido. Out the 3 codes in Bushido, discipline is possibility the most important quality required for a Samurai to not only excel in battles but also to last long enough during both good and bad times.  The same goes for investors who wish to have a long term journey in the world of investing

 

Just look up Discipline in Merriam Webster dictionary and you will find this :

 

Definition of discipline

 (Entry 1 of 2)

1a: control gained by enforcing obedience or order

b: orderly or prescribed conduct or pattern of behavior

c: SELF-CONTROL

2: PUNISHMENT

3: training that corrects, molds, or perfects the mental faculties or moral character

4: a field of study

5: a rule or system of rules governing conduct or activity

 

From the above, I can say SELF-CONTROL, training and field of study would make up the most appropriate traits to become a Disciplined Investor.

 

Do you have a set of rules when it comes to investing, but you find it hard to follow these rules and often break them? This is common for most people who have yet to be disciplined enough to follow rules that they set to become successful investors. I have also been guilty of this – when I bought shares in a company but I either :

i)                end up selling it too early with some small profit but end up regretting after price of the stock doubled, tripled, quadrupled , etc….

ii)              or I didn’t cut loss and end up keeping the stock although its fundamentals have changed  and deteriorated....

 

Here are some investing rules to follow that is essential to become a Disciplined Investor:

 

Be an Opportunist : An investment opportunity can be rare but when it comes knocking, we have to take quick action or else the opportunity window might disappear from our sight. Let's say if you have done your homework on a company and you have a price in mind that you are willing to pay for a good stock. If that opportunity comes (and usually it will), quickly take action and do not hesitate. The Market Waits For No One.

Consistency is Key : Set up a proven system to make money and follow it without fail. Be consistent in your trading plan and you will be rewarded. Make sure to not be so rigid and fine tune the system if needed. Test it out using paper trading, have a trading journal, and keep doing it until you can follow your trading plan consistently and still make money over the long term.

Have a Game Plan Ready and Follow It: Not having a game plan is basically planning to fail. So make sure you have a game plan ready before you trade. On top of that, having a game plan with a set of rules IS POINTLESS if you do not follow the plan. Set up a game plan and stick with it. Do not along the way make up  rules that was not in your original plan when you made the trade. Not only will you start to doubt yourself - it causes a lot of harm to your investing mentality and a big blow to your trading strategy.