Have the Discipline to Say No 127market is one such area. After a certain level of competency with
respect to fundamental mathematics and reading comprehension,
your success as an investor is no longer predominantly dependent
on how much smarter you are than the rest of the fi eld. Instead,
discipline and temperament take over as the defi ning contributors
to long - term success. After a certain IQ level, an increased IQ does
not guarantee added investment success.
Referring to our fi ctitious example, the ultimate failure (or
success) of the investment decision was not based on intelligence
but on emotion. The investor could not allow himself to “ miss ” the
continued rise in the price of stock. Disregarding any fundamentals
whatsoever, he made the assumption that because the shares had
continued to go up for weeks, they would continue to do so. What
is important here is not the investment performance but rather the
process employed to make the investment.
In many ways, investing is very similar to baseball. One particu-
lar similarity stands out. A batter who bats .300 during his career
will in all likelihood reach the Hall of Fame. Such is not the case
if your batting average is .250. The difference between a .250 bat-
ter and a .300 batter is 50 more hits for every 1,000 at bats. Think
about this for a moment. The difference between making it to the
Hall of Fame rests on achieving 5 extra hits during every 100 times
at bat. An additional 5 percent success rate is the key to immor-
tality in baseball. Achieving long - term successful investment results
runs in a very similar way. A successful market-beating investment
track record is not reliant on having an abnormally high success
rate. It is possible to be right 30 to 40 percent of time in your
investment picks and still deliver hall of fame type results. The
key is to make sure that the winners grossly overcompensate for
the other 60 to 70 percent of unsuccessful decisions. The only way
this is possible is through unwavering discipline in your investment
approach.
Discipline is what separates sensible market loss from foolish
market loss. If you are disciplined and your approach to investmentCH007.indd 127CH007.indd 127 9/2/09 11:47:22 AM9/2/09 11:47:22 AM