Discipline

In the second of my three best-selling books, The Uncommon Investor, a contrarian’s guide to investing in the stock market, I have one page where the only line written is: WITHOUT DISCIPLINE, YOU HAVE NO METHOD. Given that I gave those words a full page, I consider this critical to investing well and achieving good returns.

This is easier said than done. As markets do what markets do, up and down and all around, sometimes gyrating widely, it can be difficult to maintain personal control. It is kind of like the tremendous fighter Mike Tyson said: “Everyone has a plan until they get punched in the mouth.” When stock markets get pummelled, it is not so easy to avoid panicking and just sit back and take it while knowing that inaction, as compared to reaction, is the best solution.

So, what can people do to be more controlled? Well, the field of psychology is full of books that can help you in this arena. Just throw something like “Self-discipline” into your favourite search engine and watch the ideas and books unfold. 

One thing that many people want to do is the so-called “Keeping up with the Joneses.” When your neighbours are tooling around in new cars, many with the latest technology as they espouse the brilliance of Elon Musk, pushing along in your old car seem kind of backwards. 

You think to yourself, “Now, if I had just followed John-Boy and Jim Bob into cryptos and marijuana, I could be living in the best neighbourhood in the city, with my palatial cottage waiting for me on weekends.” But wait, those who piled into those areas looked super smart for a while, but the piper came calling. Chasing would not have worked out so well.

So here is something to do: read widely. Check out some of the many investing systems that people are espousing out there. See what makes sense for you. Perhaps like I did, combine various methodologies into one that suits your personal temperament. Do some paper trades to see if it seems to work. Over time as you continue your education, tweak your system. It is impossible (I thought to write “highly unlikely” but realized that “impossible” is far more realistic) to start with the ideal system. Evaluate what has gone right and what has gone wrong and learn from both sides of the results.

Then, evolve your methodology over time. Being disciplined is different from being stagnant. Over the 45+ years that I have been investing, I have modified the system to some degree. Part of that is because of continuing to learn, and another portion is because markets have transformed to some degree. 

Modern technology has also allowed me to improve how I do things, with efficiencies and depths that simply were not available before. (How many of you are still using the search engines of Hotbot, Ask Jeeves, AltaVista and AOL? Probably not many.)

One thing that should not be done when investing is PANIC!” Too many people do, and more often than not, it costs money. One thing that I like to say is: “Panic before everyone else.” No, I do not mean this literally, but yes, a disciplined panic can make sense. While that does sound like an oxymoron and can be, it also can be a wise strategy.

There is a myriad of practices that you can use when investing. I have learned to avoid all Initial Public Offerings (IPOs), for example. That does not mean that you cannot make oodles of money from them (especially those that peddle them), but statistics show that most are down in value about a year later. So, I simply exclude them from my dance card. I also only invest in companies that have been around for at least ten years. That means that I can easily miss the hottest fads, but ultimately, I know that they normally do not lead to success. 

By simply adhering to these two principles, I eliminate a ton of investing possibilities, and it makes my evaluation of opportunities simpler. Is it tough sometimes when people are making gobs of money in crypto, and I am making none? For me, it is not, and I am satisfied with my simplification of investing possibilities.

In another best-seller of mine, The Contrarian Investor’s 13 How to Earn Superior Returns in the Stock Market, I discuss many of the other investing systems out there. Many of them were combined to create my system. One does not have to attempt to reinvent the wheel to capitalize. As an aside, I still have some copies of the book available for purchase via our website at contratheheard.com. I even sign and dedicate them if you like. Yes, there is the risk of devaluation.

So examine yourself. Promise yourself that you will attempt to be patient when investing. Yes, there are lots of short-term gains to make, but it is the long-term that will set you up for life. And that requires discipline. Now count slowly to ten.

Benj Gallander, MBA, Co-editor of "Contra the Heard", Toronto, ON (416) 354-2458, gall@pathcom.com, www.contratheheard.com