Lack of investment discipline causes most losses

Lack of disciplined investing causes most investment losses. It’s that easy. If our investment program loses money over a period of years, we should probably blame ourselves, not the economy, bad luck, lack of knowledge, or falling stock prices. Time solves these challenges.

The single biggest reason for investment losses: lack of disciplined investing. That is an element that time alone will not fix.

Why discipline and investing are mutually exclusive for so many people who have little difficulty being disciplined in other things is a puzzle. It’s not too hard to be disciplined with games, for example. Breaking the rules is far less satisfying than playing the game the way it’s supposed to be played.

So why do we have so much trouble with disciplined investing? Why do we so often think that our way of doing things, or our ideas, should be better than the very simple rules that govern successful investment programs?

You only have to look at the number of people who lose, or perform dismal, to be sure of one of two things: investing is a scam, or a lot of people are wrong. Why should this 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 is something we have to do for ourselves. But perhaps it helps to know in advance that disciplined investing seems to be very difficult for many people. At the very least, we can be prepared for that lack of discipline that, in hindsight, we all recognize and regret.

There are only a handful of rules that are essential to long-term investing success. One is the appropriate diversification according to your age. Another is regular rebalancing, a simple method of taking some profit and reallocating capital to lagging investments (assuming you’ve made sensible decisions 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’ll see the mathematical certainty behind some of the keys. When he does, he’ll gain all the confidence he needs to get through the tough times 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.