Investing principle 5: Be disciplined

Patience and discipline are close bed fellows. Once you realise that to generate good long-term returns takes time, patience and belief in the markets, it is essential to put in place the discipline to stop yourself succumbing to impatience and ill-discipline. Discipline comes in many forms: sticking to the principles above; constructing well-researched and tested portfolios that should weather all investment seasons relatively well; not chasing investments that have gone up dramatically but sticking with the logical reasons for not owning them in the first place; and the discipline to not become despondent about short-term, unimportant market noise, and to focus on your long-term strategy.

We know from research in the field of behavioural finance that we tend to feel at least twice the pain from losses compared to the pleasure from gains of a similar magnitude. So every time portfolio falls, investors feel glum. The key to this discipline is to understand the very ordinariness of these market falls and not to look at your portfolio too often. Time is your friend.

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Be disciplined

On a daily basis it is near enough a toss of a coin for whether your portfolio is up or down. Better chances come with time.

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