Motivation vs Discipline - A Beginner’s Guide to Investing
Updated: Feb 4, 2020
Some time ago I was listening to a Tim Ferris podcast with Navy SEAL Jocko Willink, and Jocko made the powerful statement that discipline will carry you much further than motivation. It blew me away. Memories of training in the weight room, extra work with a batting tee, blocking drills, dieting, missing major family events while in season, and more flooded my mind. Finally someone put into words an opinion I’ve modeled my life after.
Did I want to go to the ballpark every day? Absolutely not. Was I motivated to push myself during every workout? Nope. How about blocking extra balls in full catcher’s gear in the middle of a midwest-summer heatwave? No thanks. But I did it anyway. It was discipline that carried me through those days, not motivation.
How does that relate to investing?
If you’re waiting for a podcast or book to change your heart and motivate you to invest in the stock market, you’ll be watching from the sidelines for a long, long time. If you’ve never invested before, you’re not alone, but there’s no magic entry point. If I can get all Gary V on you, you just have to “do.”
Here’s what I recommend. Start deferring money to your employer sponsored 401k or 403b plan. Immediately.
If your company doesn’t have a retirement plan, open an online brokerage account (Schwab, Fidelity, TD, E*Trade, RobinHood, etc), buy an S&P 500 ETF (Exchange Traded Fund), which is a fund that rises and falls with the S&P 500 index, and automatically wire money from your paycheck every month so you never even see the money. It doesn’t matter if it is just $50/month. The point is you are creating a discipline to systematically invest your money.
Ok, I have to say this. Knowing what I know and how we invest at Beck Bode, I don’t actually recommend an ETF. I recommend opening a brokerage account with us. Let us set up your automatic withdrawals and invest on your behalf. I know how closely we watch our clients’ accounts and how good we are at what we do. It is hard to replicate that on your own. Historically speaking, however, over a 5+ year time horizon the S&P 500 will treat you fine, just don’t lose that discipline and pull out of the market during hard times.
Don’t look for motivation when you are losing money. Just as discipline helps you start investing, it will likewise keep you invested even when the sky feels like it is falling. Motivation will be on the sidelines, exactly where you shouldn’t be.
I just finished reading Tony Robbins’ Unshakeable, and he provides some eye-opening statistics highlighting the market’s volatility and the importance of weathering the storm du jour.
Think about these stats:
On average since 1900, the market has “corrected,” or dropped between 10-20%, every year.
In that time, we have averaged a bear market (market drops by more than 20%) every three to five years.
From 1996-2015, the S&P 500’s average annual return was 8.2%.
If you pulled out of the market and held your money in cash and missed the 10 best trading days over that 20 year time, your return drops to 4.5%. That’s 10 days in 20 years, and missing them cuts your return almost in half.
If you miss the 20 best trading days, your return drops to 2.1%.
Missed the 30 best days? You lost money. Staying on the sideline for 30 days in 20 years lost you money, whereas staying in the market and weathering the storm made you 8.2%.
Six of the 10 best trading days during that time took place within two weeks of the market’s worst trading days. Did somebody say they could time the market? Didn’t think so.
If you are looking for motivation when your investment account is down, you won’t find it. If you’re trying to motivate yourself to begin investing, it won’t happen. Discipline will get you started and will keep you in the market during those 30 best trading days, which statistically we know is a much better investment decision than pulling to cash and trying to time the market.
If you remember nothing else from this article, remember this: Focus your investment strategy, and life for that matter, on being disciplined, not on being motivated.