Last 20 years – How Discipline Can Breakdown

Two keys of investing:

1. Pick smart investments to start with

 2. Stay disciplined

Discipline is a lot harder than it seems.

Let’s take a look at a mutual fund, DFA US Small Value (DFSVX) vs. the S&P 500 over the last 20 years. The fund’s return….12.75% annualized. Your money would have grown over 10 times if you just stayed put, despite crashes in 2000 and 2008.

S&P vs DFSVX since 1994

 But there were four occurrences when it would have been easy to lose discipline.

  1. Late 1990s – Everyone else is making money in tech stocks.
  2. Crash of 2000
  3. Real Estate Boom –Everyone else is making money in real estate
  4. Crash of 2008

Simply staying put can be a lot harder than it seems, but a good financial advisor should help you do it.