Discipline and Investing!

Discipline and Investing!

An investment philosophy contains the core beliefs that guide an investor’s actions and decisions.  How many times have people heard people say “Meditation has changed my life” or “Running has changed my life”.

Is it true that meditation, running, cycling, or going to a gym can change a person’s life? Well, it is the whole process that helps – not just the act itself. Let us say someone starts meditating 3 times a day for 10 minutes each. Once at 7 am, once at 1 pm, and once at 7 pm. Breakfast, lunch, and dinner? In the first week, they do 4 days and miss 3 days. Next week they do 5, then 6 and in 3 months they are meditating for 15 minutes at each session. Now, this ensures that they go to bed at say 11 pm at least – so that they can get up at 6 am and do their meditation at 7. This means no late-night parties – no drinking binges, etc.

So the activity of meditation has brought a lot of discipline to their life. That helps as much as the meditation itself! Ditto for running, cycling – the process helps. After 6 months or 1 year, they go around saying “meditation helps”. True, but partially.

When it comes to investing, again the first step is discipline – to start saving money. That is the toughest part. Once a person learns to save, doing a SIP is not so tough. The discipline of saving says 20% of a person’s salary is a good target to start with. Doing a SIP in an index fund is ideally recommended till one starts learning about investing.

So doing a SIP is about the discipline of taking money away from an investor as soon as it comes. It is one of the best ways of investing for a young person just starting to invest. It works just as well for a seasoned investor who does not want the need to think every day about where and what to invest.

Like meditating, once someone decides to think of saving and tell themselves that Rs. 10,000 per month should be the SIP amount – it can happen. Investors need not fret over missing one or two installments as it takes time to build in the discipline.

Creating wealth is a long-term, multi-year, multi-decade, multi-generational process. Somebody needs to make a start. The ideal age of course is 22, but it is even better if an investor’s father or grandfather had started the process. If they have not, anyone could. We hear such stories very often. Of SIPs started in 1999, 2008, …and continuing. The amount of wealth created is amazing.

On the other hand, we regularly read about celebrities who earned Millions of Dollars going bankrupt. Being driven to suicide. Yes, discipline is boring – especially when investors are young. However, at a later date, the same discipline gives you Financial freedom. Ironic is it not? Discipline leads to freedom!

Source: subramoney by P V Subramanyam

Asset Multiplier Comments:

• Investing has very little to do with finance and a lot to do with human behaviour. Sticking to an investment strategy in a disciplined manner ignoring other temptations is the easiest way to build wealth over time.

• Disciplined investing also gives the added benefit of staying invested over the long term ignoring the short-term fluctuations and volatility in the market. Acting during volatility is one of the most prominent reasons for wealth erosion for investors.

Disclaimer: “The views expressed are for information purposes only. The information provided herein should not be considered as investment advice or research recommendation. The users should rely on their own research and analysis and should consult their own investment advisors to determine the merit, risks, and suitability of the information provided.”