Discipline and Planning
Self-Discipline: Your result is .

"One trait that was shared by all the traders is discipline."
~ From "Wizard Lessons", Stock Market Wizards
  • Self-discipline is what many people call will-power. Self-discipline refers to one's ability to persist at difficult or unpleasant tasks until they are completed. People who possess high self-discipline are able to overcome their reluctance to begin tasks and can stay on track despite distractions.
  • Low scorers are more likely to procrastinate and show poor follow-through on their plans. Impulsive trading, erratic performance monitoring and ignoring investment positions for long periods are all characteristic of traders with very low scores.
  • In a survey of 200 currency traders in continental Europe, self-discipline was rated the second most important factor in trader success. (The most important factor was quick reaction time). In a study of the psychological factors correlated with financial success, "self-control" (a close relative of discipline) was the most significant factor.
  • Self-discipline supports many of the habits that together contribute to success. One of those habits is the ability to meticulously analyze one's performance. What factors led to a successful business decision? What happened to cause an unanticipated loss? Self-discipline is necessary for collecting and organizing this information.
  • Disorganized investors can often compensate for low self-discipline by hiring disciplined professionals to work with, or for, them.
  • LOW SCORERS can understand the value of self-discipline using the following techniques:
    1. In order to build self-discipline, start by getting motivated. Notice the importance of discipline in your life and the areas where a lack of self-discipline has come between you and your goals. For example, if there is little consistency between your stated intentions and actions (E.g., you don't meet confirmed deadlines), then you may be considered unreliable and even untrustworthy by others.
    2. Practice being "your word." When you say you that will do something, then you have made a commitment. Keep your commitments. A good way to start is to always be on time. A hallmark of undisciplined people is being late to appointments.
    3. Don't get ahead of yourself. If you have low self-discipline, then address this problem with small, do-able steps. It takes time to become more disciplined, and it will only happen if you truly feel that it is a priority.
    4. In business, it's important to be able to understand and plan for various contingencies before becoming committed. Practice thinking in this way.
Immediate Gratification: Your result is .

""Business opportunities are like buses, there's always another one coming."
~ Richard Branson
  • "Immediate gratification" is the preference for small, immediate rewards over larger, more distant rewards. People who "eat dessert first" are giving in to immediate gratification urges. Impatience and impulsiveness are characteristic of high-scorers.
  • Greed is a close cousin of excitement-seeking. Greed is often described as "excessive desire" for money or valuables. Anyone who has experienced the feeling of greed can relate to that pressured, desperate need to get more money NOW. People who are high in immediate gratification are more likely to engage in gambling behavior (taking inappropriate risks), and they are more likely to experience a greedy state of mind when evaluating potential investments.
  • Bill Miller, Chairman of Legg Mason Capital Management, beat the S&P 500 index every year for 15 consecutive years (from 1991-2005). When interviewed by the Wall Street Journal in January 2005, "Bill Miller Dishes on His Streak and His Strategies," he attributed his success to a very simple concept: "The biggest opportunity for investors is really thinking out longer term... So we tried to adjust the construction of our portfolio to reflect the neglect that analysts and portfolio managers have given to those factors. Our turnover rate has dropped significantly as we've tried to lengthen our time horizon."
  • Investors who score highly here should try to perform adequate up-front research and cultivate patience when investing.
  • HIGH SCORERS may find the following helpful:
    1. 1. Remember Bill Miller and Richard Branson's quotes above. Patience is a cardinal virtue of investors. Another "perfect" stock or setup will always come along. It is financially unhealthy to chase performance.
    2. 2. As Bill Miller describes, widen your time-perspective. This is especially useful when feeling a need to perform. Looking ahead at farther horizons or larger-scale charts can diminish your urge to make impulsive decisions now.
Excitement-Seeking: Your result is .

"The individual investor should act consistently as an investor and not as a speculator. This means... that he should be able to justify every purchase he makes and each price he pays by impersonal, objective reasoning that satisfies him that he is getting more than his money's worth for his purchase."
~ Benjamin Graham
  • Excitement-seeking describes the tendency to pursue emotionally arousing activities. Excitement-seeking is seen in investors who make large bets more for the thrill of the gain than an understanding of the game. Note that prudent, calculated excitement-seeking is seen in most successful investors.
  • The difference between successful and unsuccessful excitement-seekers is that the successful ones are more excited by a good decision than a large financial outcome. They realize that excellent research, organization, management, and execution lead to profit. They value the game more than the material rewards that will accrue from playing it well.
  • Richard Branson, the Billionaire British entrepreneur, is well known for his adrenaline-raising antics to promote his various businesses. He argues that fun is necessary to his work:
  • "A business has to be involving, it has to be fun, and it has to exercise your creative instincts."
  • ~ Richard Branson
  • A problem arises when your investing is all about fun, with profits only secondary. It is important that you enjoy investing, but it is also crucial that you not invest purely for the sake of that enjoyment. Rather, you ought to enjoy making profits as a result of following your investment plan.