Stay Disciplined With Your Investments.

Successful investing is not only about finding good opportunities. It is also about having the discipline to follow a sound plan when emotions and market movements create pressure.

Start the Lesson

THE PRINCIPLE

Don't let fear and greed make your financial decisions for you.

Markets and investment values can change. A disciplined investor understands that short-term movements do not automatically change the long-term purpose of an investment.

TODAY'S LESSON

Build an investment process you can follow.

Investing can become difficult when emotions begin to control financial decisions. Fear can make people abandon a sound plan, while excitement and greed can encourage people to take risks they do not fully understand.

Investment discipline means deciding in advance what you are trying to achieve, what level of risk you are prepared to take, and what conditions would cause you to change your strategy.

Discipline does not mean refusing to change. Good investors review their assumptions and respond when important facts change. The difference is that they make decisions deliberately rather than reacting to every market movement.

The objective is to build a financial process that helps you remain focused on your goals, manage risk and avoid making important decisions based purely on emotion.

FOUR PRINCIPLES OF INVESTMENT DISCIPLINE

01. Have a Clear Plan

Know what you are trying to achieve, how long you are investing and what role each investment plays in your financial plan.

02. Don't Chase Performance

An investment that has recently performed well is not automatically the right investment for your financial goals.

03. Control Emotional Decisions

Avoid allowing fear, excitement or pressure to make important financial decisions before you have considered the facts.

04. Review, Don't Constantly React

Review your investments periodically and make changes when your goals, circumstances or important facts genuinely change.

YOUR ACTION TODAY

Write down your investment rules.

Before your next investment decision, write down your goal, acceptable level of risk, investment time horizon and the conditions that would cause you to review your decision.

STEP 01

What is my goal?

Define what you want the investment to help you accomplish.

STEP 02

What risk can I accept?

Decide how much uncertainty and potential loss fits your financial position.

STEP 03

When will I review it?

Choose a sensible review point instead of reacting to every short-term movement.

KEY PRINCIPLE

Successful investing requires both good decisions and the discipline to follow them.

Create a plan, understand your risks and give yourself a process that helps you make decisions thoughtfully rather than emotionally.

KEEP LEARNING

Build the habit of making thoughtful financial decisions.

Tomorrow, we continue the journey by learning how to measure progress and know whether your financial strategy is actually moving you forward.

Continue to Day 20 →