Recently, I saw a CNBC advertisement where Jim Cramer stated something that is important and accurate: discipline is more important than conviction.
Jim Cramer can be entertaining, but we recommend that you ignore most of his stock recommendations and opinions. This one you should follow.
You will be financially more successful if you have an investment plan and have the discipline to stick to it. You should not make investment decisions based on your emotions and predictions about the future.
A conviction is an opinion, view or strongly held belief. Convictions are usually emotions and reactions to current or past events or beliefs about the future. Financially, following your convictions or emotions is not always in your best long term financial interest.
You may have felt very strongly that the stock market decline of 2008-09 was never going to end. You may have thought that it would take forever to recoup your money, so you may have wanted to get out of the stock market.
However, because we are disciplined investment advisors, we recommended that it was in your best financial interest to stick to your investment plan.
We recommended buying stocks during that downturn, as part of rebalancing back to the desired stock allocation of your investment plan.
For those that followed our recommendation, that was a very profitable move. That took discipline. Since then, many of those purchases have doubled.
Your emotions would probably not have convinced you to buy while the stock market was crashing.
But having a financial advisor who provides discipline and an investment plan can help you to make smarter long term investment decisions.
Being disciplined is more likely to lead you to good investment decisions. It will help you to buy low and sell high. It will help you to stick with underperforming asset classes in the short term, which will likely be financially rewarding in the long term.
You have to trust your emotions and instincts to select a good investment advisor. And then work with them so they can provide you with the discipline to help you make better decisions for the rest of your life.