6 Investing Mindset Tips to Cultivate Investing Discipline

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Becoming a successful investor starts with having the right mindset. By cultivating a strong investing mindset, you can be prepared for tough investing scenarios and put yourself in better situations for financial success.

6 Investing Mindset Tips to Cultivate Investing Discipline

Having the right frame of mind is imperative when it comes to investing, whether you’re a battle-hardened day trader or a total investing beginner.

Possessing the right frame of mind can save us from making mistakes, from going against our own plans, and from sabotaging our success.

While it’s true that we can’t control the markets, we can control how we invest in it, and much of that is influenced by our mindset.

If you’re new to the world of investing, here are six mindset tricks you should know to help you succeed in the stock market:

  • Have a Financial Plan in Place
  • Stick With Your Financial Plan
  • Leave Your Emotions at the Door
  • Focus on the Big Picture
  • Set it and Forget It
  • Don’t Chase the Next Big Thing

Let’s get into each of these investing mindset tricks in more detail.

Investing Mindset Tip #1: Have a Financial Plan in Place

It is absolutely critical to have a financial plan in place when you’re investing in the stock market.

Why?

Because, depending on how the market is performing, what you should do and what you’ll actually do are two very different things.

Nobody knows how they’ll react to a sudden market swing (no matter the direction), and the markets are fickle.

Having this plan in place can help keep you on track, even when things don’t feel right or aren’t going well.

Conversely, without a proper plan, it can be difficult to know where you’re going, and if you’re actually following your investment principles or just chasing the biggest returns or latest fad.

To craft a financial plan, you should:

  • outline your investment goals
  • determine how much you plan to invest and when
  • define your risk tolerance
  • devise how you expect to reassess your plan through time and
  • assess if there are any limitations in your plan

Having a financial plan will also make you impervious to following dumb advice – whether that’s from the news, your favorite pundit or your boss.

With a solid plan in place, no matter what the market is doing, you should be ready to weather anything the market throws at you.

Investing Mindset Tip #2: Stick with Your Financial Plan

Almost as important as having a financial plan at all is sticking to that plan.

While there are many different ways to invest, including valuation-based investing, dividend investing, index investing, etc., oscillating between a number of different approaches willy-nilly will only waste valuable time and money.

Changing investing strategies frequently is a form of timing the market.  Timing the market refers to making buying or selling decisions of financial assets by attempting to predict future market price movements.  In essence, you’re guessing.

Very few people are good at this.

Once you’ve found a way of investing that you’re comfortable with, stick with it.

Investing Mindset Tip #3: Leave Your Emotions at the Door

If you had investments during the 2008 recession, you probably remember the sinking feeling you got after seeing your portfolio get chopped in half.

Oof – that doesn’t feel good.

Unfortunately, this same feeling was used by many investors as a justification for getting out of the market.

While this may have secured their portfolio from losing any additional money, it also meant they missed out on the bull run from 2009 until now – losing out on an over 194% gain.

Conversely, when Bitcoin was on a (quite ridiculous) rally during 2017, people flocked to get a piece of the pie before it went belly up, with many people purchasing at the top for fear of missing out.

In both situations, instead of acting based on their investment plan, people acted based on their emotions – and some people paid dearly for it.

The point is, our emotions affect our behavior. They cause us to second guess our decisions, to take bigger risks than we can afford, or to cash out because we’re afraid of losing all our money.

In short – emotions hold us back.

Emotions have no place in investing. Leave them at the door where they belong.

investingInvesting Mindset Tip #4: Focus on the Big Picture

Another thing to keep in mind when investing is to focus on the big picture.

When you’re a newbie investor, it can be difficult to not watch your investments every day – especially if they’re not doing well.

But focusing on how a stock is performing in the short term doesn’t really tell us anything.

In fact, laser-focusing in on the day-to-day performance of a stock can cause us to make decisions based on our emotions (which we already know is bad).

While every stock goes through periods of volatility, over the long-term, the stock market generally moves in an upward trend.

By staying focused on the big picture, it’s easier for us to shrug off poor performance or volatility, because we know we aren’t planning on selling for a long time.

If you’re planning on holding onto your stocks for many years, then the day-to-day performance of a stock shouldn’t matter – focus on the big picture.

Investing Mindset Tip #5: Set It and Forget It

Another attitude that should be kept in the forefront of your mind when you’re investing is the “set it and forget it” mindset.

While many new investors think that investing is a heavily involved process, with a constant buying and selling of stocks to lock in profits, or the tweaking of their portfolio until it’s perfect, this couldn’t be further from the truth.

In fact, when it comes to investing, many times the best strategy is to do nothing at all.  Simply buying stocks from good companies and holding onto them indefinitely is a great way to become wealthy.

When we constantly fiddle with our portfolios in an attempt to increase our returns or minimize our losses, a strange thing happens – we actually perform worse than if we had just left the portfolio alone!

Simply buying and holding quality stocks over the long term is practically guaranteed to build your wealth.

investing wiselyInvesting Mindset Tip #6: Don’t Chase the Next Big Thing

It’s easy to get caught up in the wave of excitement when the next big thing comes along, like cryptocurrencies.

You see people making big money, and you want to get in on the action!

And while it can definitely be argued that many of these speculative investments offer big rewards, the risks associated with them often outshine that.

Many of these investments are loosely regulated, offer little to no protection for consumers, and are subject to manipulation by whales (investors who artificially inflate a stock’s price).

There is certainly big money to be made – but it’s likely not going to be made by you.

Chasing the next big thing in the hopes that it’ll reward big is a sure-fire way of losing your shirt.

Concluding Thoughts on Cultivating a Strong Investing Mindset

Investing for the first time can be scary, but that doesn’t mean you should avoid it.

By utilizing these investment mindset hacks, you can prepare yourself mentally for what’s coming ahead – helping to alleviate some of the fear that keeps people from investing.

Hopefully this article will help you on your path to building wealth and learning more about the markets and investing.

6 Investing Mindset Tips to Cultivate Investing Discipline
About the Author

Erik

Hi! I'm Erik, the creator of The Mastermind Within blog. I'm passionate about helping you improve as a person, get better with your finances, and create your dream life over time.


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Comments 2

  1. I would also add a step about rethinking your choices — maybe a part 2 to Set it and Forget It. Sometimes financial obligations change — a medical crisis, your household size expands — and the plan you developed for one life stage needs to be tweaked. If you have good financial habits, the steps you put in place probably don’t have to be thrown out wholesale, but may need to be tweaked. I know that I started my career with a very traditional buy and hold strategy which projected out for a 40-year career. But fast forward to 25+ years into my career, and I’m doing something very different (entrepreneurial v. traditional employment) and that requires a different set of plans. And that’s just one example.

    1. Post
      Author

      I love it Caroline. I totally agree with you – depending on your goals, you should be flexible and move your money around if necessary for these new goals!

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