Markets go up and down, people make some money, and they lose some money.

What differentiates those who do well in the market over time from those who do not is discipline. Successful investors use rules and discipline to achieve goals; less successful investors are often victims of their own emotional decisions.


Investing requires purpose: We invest for something; we invest to achieve specific goals. The purpose provides information we can use to design a strategy.

We need to know how much time we have, what we need the funds for (onetime event or ongoing need), and how important the goal is to us. Also, use our purpose to assess our risk tolerance for a specific goal. We don’t have a single risk tolerance; we have a risk tolerance for each goal.

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Strategy and Structure

Our purpose drives our strategy and structure. We’ll need a different portfolio for retirement 30 years away then we will for a car purchase in four years. In most cases, we’ll be using a goal-specific asset allocation model or another portfolio model for our structure.

Rule Over Emotion

This is the key to successful investing. Successful investors follow rules; unsuccessful investors follow trends and herds and emotions and many things that take them in directions other than where they want to go.

There are a few basic rules successful investors follow.

They have a methodology for selecting investments. An asset allocation model  tell us what category we need to be investing into, but not which investment to select. Many people use fees as a first screen; they’re looking for low-cost investments — that’s fine. But there needs to be a methodology past that, additional criteria that narrow the selection.

Successful investors have a methodology for rebalancing. It can be on percentage deviation from target or it can be on time. It’s not based on the sociopolitical environment and news headlines. Those are the squirrels unsuccessful investors chase.

Another Rule Over Emotion

Which brings us to the next rule: Never chase. Successful investors do not chase anything. Investors don’t react to the news or the whim of the day. They follow their pre-established rules and make changes in accordance with those rules.

They have scheduled contributions and scheduled increases to those contributions. Most employees know when they will get an annual review and some form of increase in pay. Increases in contributions to investment accounts should be pre-scheduled to coincide with the pay increase. Successful investors get their money working for them before they have a chance to spend it.

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Successful investors regularly review their portfolio and its performance. Regularly is generally not very frequently. It would rarely be quarterly; more often it’s semi-annually or annually. There’s no reason for an investor to follow or track investments daily. That habit leads to chasing, which leads to more fees and less performance. Which also means fewer goals achieved.

The Bottom Line

It would be difficult to go wrong with an investing mantra of “rules over emotion.” The key to long-term investing success is being invested and staying invested in some reasonably appropriate investments. Rules help you do that; emotions pull you away from that. Rules over emotions every time.

The challenge for many people is that it’s not glamorous. Often people think there should be some mystique or special inside road to investment success. There’s not. Professional investors rarely beat the market.

If you start reasonably early and have reasonable goals, you can attain nearly anything with market-level returns. You get market-level returns by having discipline and following rules. Rules over emotion, every time.

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