Disciplined Investor

Are you a disciplined investor?

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Do you know more than 95% investors fail to create wealth for themselves or find it difficult to reach their financial goals?

Why?

They cannot control their behaviour. It means that they fall prey to their own emotions. They do everything that an investor should not be doing. Here are some of them:

  • Don’t have any goals
  • No plan, random last minute action such as for tax savings
  • Copy friends and family
  • Take advice from popular news media
  • Falling for highest returns

In short, they just lack the discipline to be an investor.

What is discipline after all?  Discipline is about behaviour. It is about awareness, alertness and action, in that order.

Discipline is paramount in every walk of life and you too, as an investor, cannot remain immune to it.

What makes a disciplined investor?

Here  is a simple 5 point checklist. A disciplined investor

  1. Has a “Why”
  2. Invests Regularly
  3. Says “No”
  4. Has patience
  5. Is a continuous learner

#1 Has a “why”.

“Why” stands for commitment, commitment to a goal. A “why” is the bedrock of discipline. Ask anyone who you think follows the slightest discipline and you will see a burning “why” inside them.

For you, the investor, there are goals, the “whys”. You may want to save for your child’s education or your own retirement (that phase when there is no income and you want to sit back and relax), buying an asset or start your own venture.

As a disciplined investor, you clearly state your financial goals, the “whys” and then works towards them. Each goal brings super clarity in behaviour and actions.

#2 Invests regularly

It is amazing how a clarity in “whys” give direction to your savings. You confidently channelise the savings on a regular basis towards your identified goals.

This could be any regular investment method such as a recurring deposit in a bank, contributions to your PPF or an SIP in a mutual fund.

No market timing, no astrologer guidance, just simple, regular ploughing of the money into the investments that best suit your goals.

Not just investing, you bring this discipline to your expenses too. In fact, you “pay yourself first“, that is, save first and then spend of what is left after the savings. Further, you use every opportunity to add to your investments.

You know your goals and what you need to do to reach your goals. And so investing goes on, without a fuss.

#3 Says “NO”

This is one of the most important traits of a disciplined investor – to be able to say “no”. No to toxic products, no to costly insurance products, no to special products for the ‘super rich’ and no to any new mutual fund that has nothing new in it. You see through any gimmick and say NO.

You also realise your goals are personal to you and hence you do not get carried away by what your friends, colleagues, relatives are investing in. Popularity is not your parameter of identifying an investment.

This ability to say NO comes from a clarity on the goals. It further leads to a well planned course of action along with  the investments that suit your needs.

#4 Has patience

As an investor, you know how money works and how wealth grows. You are familiar with the concept and power of compounding. You realise that it takes several years for wealth to grow and compounding to show results.

And you are in no hurry! Since, your investments have been identified to deliver on goals and based on a well chalked out plan, you do not panic on market movements nor pay attention to the noise that is created by popular media.

You turn yourself almost into a cockroach, someone who can survive even a nuclear attack. Yes, patience is hard to practice and you amply realise that.

#5 Is a continuous learner

A disciplined investor is wise to rely on the wisdom of several others who have walked the path before.

As Isaac Newton said, “If I have seen further, it is by standing on the shoulders of giants“.

Charlie Munger says, “In my whole life, I have know no wise people (over a broad subject matter area) who did not read all the time -none, zero“.

As you realise, this is not about learning to copy smart strategies but to understand the core principles that go in making a successful, long term investor.

For example, this is not about what companies Buffett is investing in but what he takes into account to make an investment decision.

Your learning is not limited to investing but to build multi-disciplinary thinking using principles from several subjects to inform the decision making process.

Yes, you make mistakes too but you use them as learnings to make better decisions.

Finally, you ask intelligent questions of their portfolio, going beyond just returns.

 

This is what being a disciplined investor is all about. As you would realise, it is tough, very tough. I have personally faltered many a times. I still do. But I am on it. What about you?

Between you and me:  So, are you are disciplined investor? Honest thoughts please. The comments section is waiting for you. 🙂

9 thoughts on “Are you a disciplined investor?”

  1. Hi Vipin,

    I read few of your articles and it was explained very nicely. Thanks for guiding everyone how to invest money properly.
    From next Month, I am planning to invest 20000 per month to get good return in future (10 years). I think I need to start investing in mutual fund through SIP. Even if I read few of your articles, I am still bit confused which plan to select (i.e largecap, midcap, smallcap, multicap). I really need your expert suggestion for few plan to proceed further.

    If I invest 20000 per month, how much sum can I expect after 10 year.
    Thanks in advance

    • Hello Ashok

      Thanks for reading and the feedback. Well, to share with you, it has taken me years of work to be able to write these articles. Even today I feel I need to learn a lot more.
      So don’t give up. Give yourself more time to be able to understand and learn. The fact that you have shown the inclination to learn is in itself a big motivator.
      As for your investments, what would you mean by good returns? Can you put a number to it? 10%, 20%, 30% – what is it?

      If I may suggest, do you have financial goals (children’s education, retirement, buying an asset) that you have to meet and that you can use as a benchmark to direct your investments?

      To know how much Rs. 20,000 per month investment will be in 10 years, use the PV (present value) formula in excel.
      Here is an article: https://vipinkhandelwal.com/investment-decisions-how-to-get-them-right/

      Thanks
      Vipin

      • Thanks for your time. Currently, I have invested Rs 72000/- in LIC (money back) , Rs 48000/- in Superannuation fund and 60000 in sukanya yojana for my daughter future. My company is providing 3 lakhs health insurance for my family.

        Still I would like to invest Rs 20,000 per month in mutual fund with a return of more than 20% for 10 years. Please guide how can this be achieved.

        Thanks once again
        Regards
        Ashok

        • Dear Ashok

          If I may ask, why LIC (money back). I am sure you are aware that the returns of such policies are poor.
          Is 3 lac health insurance enough?

          20% returns is an aggressive expectation. For regular investments for the next 10 years, your expectations should be around an average of 10 to 12%.

          Unless, you are more realistic with your expectation, any investment idea is going to be worthless.

          Vipin

          • Thanks once again Vipin for sharing your comment. Actually I was not aware about the LIC policy for less return as I did 8 years back. I am planning to surrender it very soon.

            Yes, you are correct that I should not expect more return. I am totally new in this field. I don’t have any idea. I am sorry.
            Still I need your expert suggestion for few long term policy where I can get more return (>10%) by investing Rs 20,000 on a monthly basis. Please suggest.

            Thanks in advance

  2. Hi Vipin,
    I am 31 and after investing for 8 years in FD’s ,PPF and NSC, I have finally opened my eyes and started investing in equity mutual funds. Yesterday I created account on aditya birla myuniverse (free) and created instant SIP of Rs.2000 each for the following:-
    1. SBI Blue Chip
    2. AXIS Long Term Equity
    3. BSL Tax Relief’96 Fund
    4. ICICI Prudential Value Discovery
    5. DSP BlackRock Micro Cap
    6. Mirae Asset Emerging Bluechip

    As a new investor, I selected these based on the ratings from moneycontrol. I wouldn’t say I am a disciplined investor as I am very anxious and want to add more funds and invest more to get high returns. May be with time I will learn more.

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