5 Ways To Be A Disciplined Investor

January 31st, 2023

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After you've invested your savings, you'll probably feel a twinge of anxiety. Why wouldn't you? You probably just spent thousands of dollars on something you couldn't see or touch.

There is something you can do to ease that anxiety: think like a disciplined investor. Keeping a steady hand can be a challenge. The more you do it, though, you will develop callouses to protect you from the sharp objects littered all over the market. Following these tips will help you become a disciplined investor:

1. Don’t trade too much

After people have invested for a while, they get this itch. They see the stock market swing up and down, and they think to themselves, “What if I timed my investment purchases so that I bought them just before it went up, and sold them just before it went down? I'd make even more money!"

So they try. They buy stocks or ETFs one day, and sell them the next day. During one of these tries, they make money, and they're hooked. They think to themselves,

"See? I knew it! I'm a rock star. I'm the Wayne Gretzky of investing. I've got unlimited potential!"

They trade everyday and don't pay attention to all the fees they pay. Studies have shown that most investors would be far better off not trading at all. You can save on fees and keep pace with the market by focusing on only making trades when you should.

2. Keep your emotions out of it

In the late 90’s, the internet craze ruled the stock market. Stock of a company went up, just because the company attached ".com" after its name. Ordinary working people quit their jobs to focus solely on playing the stock market.

Today, we know the epilogue to that story. Those people lost tons of money. It's easy to sit here and wag a finger at them, telling them how foolish they were. However, would you have been comfortable telling them so during the internet craze?

Put yourself in their shoes. They saw stocks go up year after year. They felt validated in their beliefs. Studies show that human beings make decisions primarily with their emotions, not their brains, which is why emotions are so hard to resist. By thinking critically about why you are making investment decisions, you can pinpoint if you are thinking emotionally. At a minimum, at least you’ll know you are thinking emotionally and can assess whether your emotions are right or wrong!

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3. Diversify 'til ya die

Have you ever had someone tell you all they owned was Apple stocks? That should have made you fall off your chair. It's likely that this person wasn't putting lunch money in; rather, it was this person's retirement nest egg.

But this is not uncommon.

To see why this is such a terrible mistake, ask yourself a question: if you had just 5% chance of losing half of your savings, would you invest? For most people, the answer is no. But this is the kind of situation you put yourself in if you don't diversify.

Even if you're the best investor in the world, you simply can't predict all the possible things that can happen to a company. But if you're the average investor, with no training on how to properly analyze a company, diversification becomes doubly important, as it protects you against things you've never thought of. This is why many investors love ETF’s because you're investing in hundreds or even thousands of different stocks and/or bonds.

Keep yourself spread and diversified, it minimizes your overall risk and keeps you from making mistakes that can sink your entire portfolio.

4. Use your TFSA to its fullest

When asked what they've invested inside their TFSA, you're likely to get a confused look, and a response something like, "What do you mean? The bank just pays me interest…”

They receive interest because most banks automatically invest your money in GICs. By buying GICs, you're basically lending money to the banks at a super low rate, which is more to the advantage of the banks. A GIC can be a good investment when done correctly - particularly as a short-term investment when you don't want to take too much risk in the stock market. However, it more often than not leans the odds to the house over you.

This is where a TFSA comes into play. You can buy all manner of stocks, bonds and funds using your TFSA. A TFSA has many strengths: because your contribution room resets on January 1, it's excellent for meeting short-term goals (which is why it is arguably superior to the GIC's as a short-term investment vehicle). But it's also excellent for long-term planning because your portfolio growth potential won’t be slowed down by taxes being taken out, allowing money to compound over time.

Know how best to utilize your TFSA and you will become a more disciplined investor.

5. Study people with track records of success

In the best-selling book 'The Millionaire Next Door’ by Thomas Stanley, the author interviewed wealthy people, in order to understand how they became wealthy. He found that among other things, wealthy people were knowledgeable about investments.

In one story, the author recited how one particularly wealthy person handled unsolicited calls from brokers pitching their investment ideas. The wealthy person told them that if they're so bright, they should send him their personal income tax returns, to show that they know what they're talking about. Of course, they never followed through..

Remember that when learning from others about investing, do it based on the person's long-term track record. Not by how good the person's hair looks. Not by the kind of suit they're wearing. But by their long-term track record.


There are many ways that you can personally make mistakes when investing. You might feel overwhelmed by the thought of making such mistakes, and feel the temptation to just keep your cash under the mattress. However, this would also be a mistake.

Here's the good news. Not making mistakes is relatively simple. It just takes being a disciplined investor. Ignore your emotions and you’ll more often buy all the right investments. Understand how certain accounts work - like a TFSA - and you’ll put those assets in the right place. By focusing on being a disciplined investor, you will be surprised how little you feel bothered by the ebbs and flows of the market.

You're now on track to be a disciplined investor. Give five more minutes of your time to continue your journey:

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