What is the real meaning of discipline in Investing?


In investing, While reading books, Blogs, Googling, we came to know that we have to be disciplined to become a successful investor but what is the real meaning of discipline in investing.

Please share some discipline examples.

Please guide.

When we talk so frequently about Discipline, in Financial Markets, it means that we have to be regular in every aspect of it. It may be having a close look on each minute development happening at the Company’s you are Tracking or Invested in, Updated about the New Products/Services Launches by the Company, Investing & Regular in Allocating Capital in the Company, preferentially in SIP Mode, be patient to hold the Business, even tide is not in the same direction, Keeping yourself Updated all the times, with anything & everything related to the business you are invested in.

Hope this helps & there are lot many angles to puth the stuff in words…

Disclaimer: From memory, so while the gist may be accurate the details may be a little off.

'#1 > Warren Buffett has often emphasized that one needs to keep within ones circle of competence.

One has to analyze/decide where ones circle of competence lies and stick within that circle. Now that may sound easy in theory but is often very difficult in practice. This is where discipline comes in.

During the great tech bull run (1999-2000) Warren Buffett choose to stay away from tech stock because be claimed not to understand them. So far it sounds easy but realize that during this phase the market was up by 50% (Approx) and his portfolio consisting of old world businesses was down 30% (Approx.).

He under-performed the market by about 80%! and a lot of stories writing him off started appearing in the press but he stuck to his guns. Just imagine yourself in that position and then imagine the anguish/pressures that you and me will face in a similar situation. He did not allow any such thoughts/feelings/feedbacks to sway his conviction. That is discipline.

'#2 > Buffett has followed/studied IBM for more that 50 years (His own words, IIRC) but refrained from investing till he had the clarity that he was seeking. Now that again is discipline.

'#3 > Buffett’s investment in Amex during the Salad oil crisis again required objective analysis of the facts. Again a result of discipline.

'#4 > Buffett insists on at least 10 years of financial data before even considering investing. That effectively means that most fads & hot IPO issues are ruled out even if the current financials look great. Again a result of discipline.

'#5 > Buffett was sitting on a huge pile of cash before 2008 market crash, keeping the money is the most liquid treasury, forgoing a lot of interest income (Towards the end, ~$2 Billion/Year on ~$50 Billion). Again comes with discipline. Read about his GE transaction during that period.

I could go on and on but I think that should get you started. Best to read and listen to some of the best investors out there and no one has a better record that Warren Buffett.


“Warren Buffett has long told college student and investors that if they behaved as if they had a 20-ticket punch card that had to last them for life - and the moment that punch card ran out, they could make no more investments - they’d dramatically improve their investing results because they’d think long and hard about committing to a stock, business, or piece of real estate before they laid out cash” – This is discipline.

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This is really a simple thing to describe, but by no means easy to follow. My simple take on this topic without any complex theorizing:

  1. You own the price at which you buy a piece of the company, or a stock
  2. You own the time when you buy (if a company you like is not available at a price you like, dont buy & sit on cash!)
  3. You own time to hold - in other words, no one, or no external circumstance can force you to sell.
  4. You own the criteria to invest, or not ( if you have decided on Grahamian value picks, or GARP style, or ROE/ROCE, or Dividend style, or a mix of any of them) and do not make exceptions on the criteria.

That’s it.

Here’s a link to spice up the somewhat serious discussions this forum normally has. Admins - do delete this link if not appropriate!

Though this scene was never intended to anywhere be close to the discussion at hand, nevertheless, the words spoken by the inimitable Raj kumar ( @ 2:30) is probably the best way to describe Discipline !

Very Nice points explained in simple terms.