The Importance of Discipline this Holiday Season

As the holidays approach, it can sometimes be hard to stay disciplined. For me, the trouble starts when there are so many cookies and treats around. It can be hard to say no! At any other point during the year, this (usually) isn't an issue.

You know what also requires discipline? Investing. And when I say investing, I mean long-term investing. I'm not talking about buying a stock and hoping it "goes to the moon". While this is a possibility, long-term investors are, well, focused on the long-term performance of their portfolio and not worried about the short-term noise. What is the secret that keeps these long-term investors calm?

The answer is discipline. Take a look at the graphic below. The teal shades represent market expansion periods (bull markets) and the yellow shades represent market recession periods (bear markets) for the S&P 500 going back to 1926. I don't know about you, but I see much more teal than yellow in this graph. The average bear market lasted 10 months whereas the average bull market averaged 54 months! In other words, if you can stay in your seat and believe in your investment strategy, long-term investors can typically be rewarded for this.

Just like how my discipline gets tested during the holiday season, investor discipline gets tested when markets decline. Investing can be painful in times likes these, but try to remind yourself what the benefits are by staying in your seat and focusing on the long-term goals for your money.