The Most Important Ingredient for Investing Success

By Carl Lachman, MBA, CFP®

Eating a Lot Less

In 2006 and 2007, I lost a little more than 50 pounds. Well, I didn’t “lose” the weight; I didn’t misplace it. I know where it went. My body burned it up to keep me going, since I was eating less than my body needed.

This was a rather foreign concept to me. After all, I was known as someone who “loved groceries,” and my wife captured my heart with a sneak attack through my stomach. I was used to enjoying really good food and packing my stomach absolutely full. Ice cream for dessert was the perfect way to fill in the gaps and maximize the fullness.

I knew that one had to eat less to lose weight, but it had never quite registered that to lose weight, you can’t just eat less than you are currently eating. Rather, to lose weight you need to eat less than your body otherwise needs to maintain a constant weight. You need to starve yourself a little so that your body starts using up the stored fat. Yes, I was hungry most of the time while losing weight.

A Simple Decision, but a Hard Change

The decision to lose weight was a simple one to make. And it was not difficult to figure out how much and which items I could eat to lose weight; it just took trial and error. The most difficult part of losing weight was having the discipline to make it happen. Without discipline, I’d still weigh too much.

What is discipline? If you want to lose weight, it is controlling your urge to eat. You have to train and teach yourself to stop giving into hunger pangs. The urge to eat is hard to overcome, especially at first, but if you are willing to get over those urges, they weaken over time as you control your eating. Without discipline, your diet will fail.

Many Ways to Invest, but One Key Ingredient

When it comes to investing, discipline is also the key ingredient. You will not be successful as an investor without it. You can invest money in lots of different things and make your money grow, but it will never happen if you aren’t disciplined.

Warren Buffett makes a decision from his research on what he thinks a company’s stock is worth per share, then buys the stock only when he can pay less than that amount. He never pays more. It doesn’t matter if he thinks the company is a good one. It doesn’t matter if he is excited by the company’s new products. He will not pay too much. He waits until the price is right. That is discipline.

A real estate company in Southern California buys older apartment complexes, renovates the facilities, and then rents out the units. This company has been successful and now has over 7,000 apartment units. But they never pay more for an apartment complex than they think it is worth. Over a couple of years they may pass on 50 complexes that are for sale, but will not purchase any unless the price is right. Discipline.

The bond mutual fund business called PIMCO uses an approach with bonds that involves certain derivatives in all of its mutual funds. It is the way they have found to add a little bit of investment return and distinguish themselves from their competitors. They do it the same in every fund. They couldn’t do it that way if they didn’t have discipline.

Investors make their money grow by investing in commodities, stocks, real estate, derivatives, bonds, interest rate spreads, volatility, currencies, mortgages, etc. There are thousands of ways to invest. But if you jump from one approach to another and never learn how to master an approach, you will never be successful. You need to stick with an approach through the ups and downs that come. You can’t bounce around. You must control your urge to change and have discipline.

Discipline must be present to be a successful investor.

“Where Can I Get Some Discipline?”

It would be nice if discipline was an ingredient that was readily available on Amazon Prime and could be delivered for a low price in two days. Unfortunately, this is not how it works. Everyone must have or manufacture their own discipline.

There are some unusual people, like Warren Buffett, who by all appearances have a naturally occurring abundance of discipline. Lots of self-control. If you have self-control, then you can choose an investment approach, do the research regularly, make the changes when needed, and repeat the process over a long period of time. You control yourself when the financial markets are freaking out, sticking with your approach as the markets gyrate. You stick to your approach, and in the long run your discipline can help make your investment portfolio grow.

But most of us are not wired with that much self-control, so what do we do? 

Write It Down        

The first thing that will help you be more disciplined is to decide on an investment approach and write it down. Write down how much you are going to commit to the investment, when you are going to invest, when you are going to sell, and what you are going to do if the investment drops in value. Just taking the time to write down your plan will make you a little more likely to control yourself and be disciplined.

Switch On Autopilot

Next, look for ways to make your investment approach run on autopilot, without the need for you to intervene.

You can set an amount to be automatically transferred from every paycheck into a retirement account. You can tell the retirement account provider how to invest that money every time there is a deposit. And most of the time today, you can also tell the retirement account provider the diversified mix of investments you want and what to do if the mix becomes unbalanced. Once these things are set up, you don’t have to make frequent investing decisions.

Set and Forget

Once you put your diversified investing on autopilot, stop opening your monthly statements.


Discipline is about self-control: controlling yourself to do certain things, but also controlling yourself to not do certain things. If you stop opening your monthly investment statements, you’ll stop reacting in the wrong ways to what you see there. When we watch our investments too closely, our emotional responses to the ups and downs of our investment portfolio cause us to throw discipline out the window and react in the wrong way, often at exactly the wrong time. We sell when investments are down and buy when they are up, just the opposite of what we should do.

Most investment companies prefer to have you go paperless and get your statements online, and that is a good way you can ignore your statements more easily. You won’t have a big envelope of statements sitting in your mail begging to be opened. When you go paperless, you’ll get notified when statements are available, but then you’ll have to go to your account website, enter your login and password, probably have a second factor identification challenge, etc. It is kind a pain to get to your statement online, and that turns out to be a good thing. It saves you from yourself.

Don’t take this advice to the extreme and never look at your investments, but make a plan to look at your investments every six months or so. Put a reminder on your calendar. Have a written plan of how you are going to review your investments every six months and what you will do when you check. Think of ways to make yourself more disciplined.

Buy Some Discipline

Many people reading this article are now ready to throw in the towel. There is no way they will be able to be disciplined like this, even if they set things on autopilot. When their investments go up and down, they lose it! It doesn’t matter if they read and understand all the evidence about how long-term investing with discipline is successful. They can’t do it! So what can they do?

There is an easy solution: They can buy discipline. They do this by hiring a fee-only financial advisor that will make investing decisions for them and talk them down when they get scared by what is happening in the financial markets. As long as the advisor is held to the fiduciary standard, they are required by law to put their clients’ interest first, and it makes sense to hire them to be disciplined with your investments when you don’t have that skill.


There are thousands of ways to be a successful investor, but none of them works without discipline. Figure out if you have the discipline that you need, if you can manufacture it through autopilot decisions, or if you need to buy it. One way or another, you need to get it to be successful with your investments. Figure out the discipline question first, then start investing.

Carl Lachman, CFP®, MBA