Getting Started: Being Disciplined
Now that you've examined your risk tolerance and time horizon, and you've planned your budget and set your goals, what's next? Now comes the toughest part of getting started on investing - being disciplined.
Those who are disciplined
Some of you might be saying, "That's easy, I've been a disciplined person all my life. How tough can sticking to my investment plan be?"
Picture this: Your child is all grown up and will be going to university in a year's time. You foresee a large amount of money being needed for books, living expenses and so on. You think you have everything covered, and then suddenly, your father falls ill and requires money for a triple heart bypass operation. The only way you can afford to finance both would be to cash in the investments meant for your retirement. So what should you do?
Ok, perhaps this example is a little drastic, but you get the idea of the kind of goal conflicts that can arise. Unexpected things can happen to throw you off-course. To ensure that you can still stick to your initial goals, you should try to get round the obstacles, rather than allow the obstacles to change your pre-planned course. In the above example, perhaps you can take out a loan for your child to help offset the full cost of his education, or, you could buy Mediclaim insurance for your family, including your parents, it needn't necessarily mean a dip into your retirement investments.
Those who are not
For those of you for whom discipline is a problem (who have sudden urges to buy luxury or costly branded items), this point becomes even more important. If you constantly compromise your long-term plans for short-term gratification, you may never achieve your goals.
Being disciplined does not mean being rigid and sticking stubbornly to your goals; rather it is keeping your goals in mind when you are making your decisions.
There will be times when you feel you have to change your plans. This is alright. As long as you put a new plan in place and you have new goals to reach out for. In any event, your needs change over time so you should look at your priorities every five years or so, to be sure that they're still what you want.
Next: Chapter 2 - Basics of Investing