7 Tips For Being A Disciplined Investor In Every Market

Disciplined Investing
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For most people, becoming a disciplined investor is hard. And in today’s ever-connected world, it’s getting even harder. 

Stock prices and news are available at any time with the swipe of a finger. In seconds, and based on however you’re feeling that day, you can make massive changes to your once-solid investing strategy. 

But then again, there’s a small percentage of investors who manage to turn down the noise and stick with a strategy that’s proven to work over decades, regardless of short-term market conditions. 

What separates these disciplined, successful investors from the rest of the pack? 

Here’s what the research says about their habits and mindsets.

#1. Educate, Then Allocate

Among the most fascinating and important market statistics worth keeping tabs on are rolling index returns.

Rolling indexes tell you how an index, such as the S&P 500, has performed over a certain time frame. 

This allows you to compare the past performance of investment returns. For example, a five-year rolling index chart of the S&P 500 would show the different returns of the index for multiple five year periods, such as 1970-1975, 1971-1976, 1972-1977, and so on. 

The benefit of this is that it allows you to identify what bad, average and good returns look like over specific lengths of time.

As an example, let’s take a look at the rolling averages for the S&P 500 index over 5, 10, 15 and 20 years, going back 60 years and taking dividends into account.

S&P 500 Rolling Returns
All returns are annualized. Source.

The key thing to understand is that over longer periods of time there is significantly less volatility in the market. Short-term, there is no question that investing in stocks is risky. While you have a chance at larger reward, there is often a greater chance of a massive loss. 

Long-term, however, returns really smooth out. 

Charlie Munger once said: 

[…] if you are not willing to react with equanimity to a market price decline of 50% 2-3 times a century, you are not fit to be a common shareholder.”

Disciplined investing involves holding, and even buying, in both good times and in bad. Understanding the different results you can expect in the short-term can certainly help you avoid the costly but all-too-common mistake of buying high and selling low. 

#2. Don’t Check Stock Prices Daily

For the non-professional investor, there’s no benefit to checking stock prices every day. Actually, doing so can cause a lot of harm.

One of my favorite findings of investor behavior came from a recent Fidelity study. In an attempt to identify which investors performed the best, they analyzed the individual performance of each 401(K) account held at their brokerage.

What they found was that the investors who performed the best were those who forget they even had an account.

If your retirement is 10+ years away, knowing what the stock market will or will not do over the next few months does you no good. So there’s no need to constantly check in on the Dow or your individual portfolio holdings.

And while online brokerages are great in some aspects, they also make trading frighteningly easy. So, if you’re constantly checking stock prices, all it can take is a few down days in the market and you find yourself selling based on emotion rather than logic. 

Personally, I have a spreadsheet that I update biannually with my investment holdings for my estate plan. Most of my holdings are with Vanguard and Betterment, and I don’t have apps for either on my phone. 

This makes it much easier to stick to my long-term investment strategy.

#3. Make It Easy to Invest

Disciplined investors invest in good times and in bad. Instead of worrying so much about what the market returns, disciplined investors are more focused on how much they save. 

So, if you’re going to measure something in the short-term, start with your savings rate, which is the percentage of income you’re able to invest. 

Ideally, take advantage of dollar-cost averaging into the market, where you’re automatically investing on a set timeframe regardless of what the market is doing.

The easiest way to do this is through 401(K) contributions, where a percentage of each and every paycheck is invested.

For IRAs and taxable accounts, consider setting up an automatic transfer from your checking account the day after your paycheck hits.

Related: Roth vs. Traditional IRA Decision: Which One Will Maximize Your Money?

#4. Make It Hard To Switch

While you want to make it as easy as possible to invest, you also want to make it as hard as possible to switch investments. 

A study published in the Journal of Finance titled “Trading Is Hazardous to Your Wealth” found:

“Individual investors who hold common stocks directly pay a tremendous performance penalty for active trading. Of 66,465 households with accounts at a large discount broker during 1991 to 1996, those that trade most earn an annual return of 11.4 percent, while the market returns 17.9 percent…Overconfidence can explain high trading levels and the resulting poor performance of individual investors. Our central message is that trading is hazardous to your wealth.

One of the reasons why I choose to invest with Betterment is that the platform doesn’t allow me to invest in individual stocks.

If I wanted to do so, I’d have to transfer the money to another brokerage, and maybe even sign some paperwork to close my account (I really don’t know). And then I’d have to wait a few days (perhaps as long as a week) for the money to transfer. 

I see this as a very good thing. It prevents me from running off and making a stupid decision based on short-term market fluctuations. 

Related reading: What I learned about investing from buying Tesla at $26 per share.

#5. Have An Emergency Fund

An emergency fund, even if it sits in a high-interest savings account, earns very little in our current low-interest-rate environment. 

Yet, from another point of view, if an emergency fund prevents you from making one bad investment decision because you’re short on cash or up at night worrying, it’s worth far more than the 1% or so in returns you get these days. 

I don’t always recommend someone building up a three-month emergency fund before starting to invest, like the standard advice says.

An alternative is both investing and building up your emergency fund at the same time; e.g., by investing up to your 401(K) match and then using what’s left to build your emergency fund. 

But as your portfolio grows, you may want to increase the size of your emergency fund as more damage can be done by sudden, and often irrational, changes to your portfolio.

Here’s a step-by-step guide to building an emergency fund.

#6. Associate Yourself With Disciplined Investors

One of the most influential investing books I’ve ever read is The Bogleheads’ Guide to Investing, which was written by members of the personal financial forum

The name Bogleheads is in honor of the late Jack Bogle, the founder of Vanguard and the first person to come up with the index investing approach. 

Although I read the book over a decade ago, I’ve identified myself as a Boglehead ever since. I tend to view financial decisions through the lens of, “Is this what a Boglehead would do?” While I didn’t know this at the time, that type of association has been very powerful.

An interesting study done by researchers at Stanford and McGill University in Montreal, titled “An Analysis of Individuals’ Behavior Change in Online Groups,” found that:

“[…] after joining a group, users readily adopt the exercising behavior seen in the group, regardless of whether the group was exercise and non-exercise themed, and this change is not explained by the influence of pre-existing social ties.”

We’ve known for a while that we tend to adopt our closest friends’ habits. However, in the new world we live in, it seems that we also adopt the habits of the online groups we associate with. 

As such, finding some type of online group that promotes disciplined, long-term investing can help you get through the tough times. 

The F.I.R.E movement is a popular one right now that promotes disciplined investing, combined with a high savings rate, over the long-term. There are also dozens of high-quality communities, blogs, podcasts, and forums on the topic.

In our list of the best investing books for beginners, there are a lot of great authors with large groups. A good starting point is to read some of the more popular books on the topic, see which person speaks your language, then find yourself joining that community. 

#7. Have a 10% Rule

If you truly want to gamble with individual stock picks, give yourself permission — just place a limit on how much you’re willing to risk. 

As an example, my personal rule is that I can’t invest in individual stocks if it exceeds 10% of my net worth. 

This has worked out well for me, as in the case with Tesla (although I still made the mistake of selling way too early). And sometimes, it has not worked out so well. 

I like investing. I like the potential for reward. However, I do know my limits. And betting a large chunk of my net worth is never a smart move. 

Final Thoughts on Investment Discipline

From one point of view, investing is pretty easy. After all, you’ll have a lot of success if you just invest a percentage of every paycheck into the market in an index fund. 

Heck, as Fidelity showed via the study mentioned above, you don’t even have to look at your portfolio. 

What makes investing hard, however, is us.

Specifically, most of the traits that humans seem to be hard-wired for are the exact opposite of what’s required to be a successful, disciplined investor who reaps consistent benefits in both bull markets and bear markets.

These seven tips have helped me, as Jack Bogle would say, “stay the course” over time, and research suggests they can help most investors in most situations.  

Want to learn more about building a rock-solid investment approach that works regardless of short-term stock market volatility? Here are the reading lists from some of the world’s best investors and market analysts. 

R.J. Weiss
R.J. Weiss is the founder and editor of The Ways To Wealth, a Certified Financial Planner™, husband and father of three. He's spent the last 10+ years writing about personal finance and has been featured in Forbes, Bloomberg, MSN Money, and other publications.


  1. You have explored some great points in this article R.J.

    Some of the world’s greatest investors were able to overcome (or maybe they were just wired differently) many of the tendencies that we have as humans, causing us to make poor investment decisions.

    I know, for one, that I can be impulsive and thus, plan to invest most of my money into index funds.

    I like how you made a lot of great references, they really added value to the article.

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