There are people who are disciplined and there are who are not. What is the difference between these two sets of people?
The first set of people lead an orderly, healthy and peaceful life, prepared for the ups and downs, not upset with the lows, and make others feel comfortable in their company.
The second set of people are those who keep moving from one crisis to the other driven more by circumstances and responding to them wholly unprepared taking a toll on their health, peace of mind and relationship with others.
Why discipline is necessary?
Life is a journey. Whenever we think of going on a vacation do we go it just like that?. For such vacation, there has to be lots of planning and preparation to meet certain uncertain eventualities. Same is the situation for life. A planned journey makes it orderly, happy and peaceful. So is for life and so is for investment.
Discipline is a Key factor to be a successful long term Investor:
Why do we need to invest at all? The answer is to meet our short term, medium term and long term financial goals.
Our idea of investing is not getting returns from one single transaction, but to invest and generate returns in multiple transactions over period of time. So that, we can meet all our financial goals and be a successful long-tem investor.
To be a successful long term investor, you need to be a disciplined investor. You need to follow some strategies consistently. You need to review your portfolio regularly.
Creating a disciplined investment plan:
The Discipline of writing something down is the first step toward making it happen.
We are living today much longer and we are going to live much longer tomorrow. Most people are not in a position to earn by working once they are above 75 years of age. If they have to live another 15 years or so they would need money and with inflation, they would need more money than today, to lead the present lifestyle.
Hence a disciplined investment approach will help them to achieve their long term financial needs and will not be required to depend on others. For this, one has to invest in equity more, when one is young, and after doing it for 25 to 30 years may start moving towards more to debt. You need to invest in such way that your investment are beating inflation at least during the accumulation phase i.e. pre-retirement phase.
A long term plan of investing in Mutual Fund SIP (Systematic Investment Plan), in mutual fund schemes with a good track record, will give you fabulous returns in an investment horizon of 25 to 30 years. The last 40 years in Indian economic scenario we have seen several ups and downs and we are going to see similar volatility in the next 40 years. The human spirit creates the volatility and also helps overcome them and move towards a more comfortable life style.
Why Discipline in Investment Needed?
There is no magic wand that can resolve our problems. The solution rests with our work and discipline.
A journey of investment over 30 years is like going for the Mt. Kailash Manas Sarovar Yatra of olden days (not that of today where you go by air to Kathmandu, then take a beautiful SUV to China border and from there a still more beautiful bus to Mt. Kailash Manas Sarovar) where meticulous planning is required with regular monitoring when faced with uncertain weather and other challenges during the Yatra. A highly disciplined person would have been able to complete the Yatra and return to family and friends in those days.
Same is the case for a 30 years period yatra of investments, where you have vehicles like , Blue chip Company stocks, good Mutual Fund Schemes, Gold ETFs and Fixed deposits with banks and will help you to build a financial castle which will take care of all the earthquakes, cyclones, and droughts of life beyond 75 years of Life.
Get prepared in a Disciplined Way!!!
Some Disciplines to Ponder Over:
• Create a customised financial plan, implement the financial plan and stick to the financial plan regardless of the market conditions.
• Create an asset allocation ratio based on your risk taking appetite and required rate of return; Rebalance periodically and maintain the same asset allocation.
• Continue your Mutual Fund SIP till you meet your financial goals. Don’t stop in-between.
• Review your financial plan and investment plan regularly.
Discipline is the bridge between goals and accomplishment.
The author is Ramalingam K, CFP CM is the Chief Financial Planner at holisticinvestment.in, a leading Financial Planning and Wealth Management company