Discipline And Consistency

2 Important Keys to get Higher Returns on Investment: Discipline and Consistency


Higher Returns on Investment

To be a successful investor and to get higher returns on investment it is extremely important to develop a strong sense of discipline and consistency as well as a deep understanding of investment returns.

Returns

There are three main characteristics of equity (that is, stocks) that you need to understand before you begin investing. Those three are as follows:

  1. Equities have historically been expected to garner higher returns than fixed-income investments. This is because they fluctuate much more than fixed-income investments and thus have a greater potential for growth. It is important to remember that this increased potential for growth does, of course, come with increased risk.
  2. Smaller, emerging stocks are typically expected to see higher rates of growth than the larger, higher-priced stocks. This is because emerging stocks have more room to grow and (still being at a relatively low price) are able to exponentially grow your investment at a faster rate than well-established, high price stocks.
  3. A low priced value stock will most likely have higher returns than a high priced growth stock. This is because the lower price reflects the relative amount of risk involved at the moment. However, this risk can be incorrectly estimated by the market thus artificially lowering the price of a value stock (and likewise artificially raising the price of a growth stock). Because of this, it is important to do your research and try to determine the true value of the stock.

Discipline

Discipline is absolutely essential to investing. You need to have the financial discipline to make smart decisions and find the appropriate strategy to suit your investment goals. A good habit to cultivate to help you stay disciplined is budgeting. Even if you are relatively well off and don’t need to keep track of every penny, it is a good idea to make a budget and stick to it (this includes setting some money aside for savings and future investments).

Discipline also refers to the need for you to pick a strategy and stick to it. Choose the right investment strategy to achieve your personal goals and then choose the appropriate risk management strategy that fits with your investment goals as well as your risk profile.

Investing requires careful research and frequent monitoring of your portfolio to ensure that it is performing well enough to meet your goals.

Consistency

Consistency is crucial to the success of your investments. It is important to persevere through bear markets and to resist tempting short term gains in bull markets. Once you have chosen a strategy, you should not deviate from it as this deviation could dramatically reduce the effectiveness of the strategy you have employed.

Many of the most successful investors throughout history have made a point to emphasize the importance of consistency in investing. You need to give your portfolio the time to mature and give you the returns you hope to see. If you jump ship as soon as things get rough, you risk losing out on potential future gains.


About the Author Investegies Team

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