Investing: Discipline, First and Foremost
"The essence of mathematics is not to make simple things complicated, but to make complicated things simple."
If you want to beat the market, you need to pick a strategy and stick with it - NO MATTER WHAT. In What Works on Wall Street, O'Shaughnessy writes that in order to beat the market, it is crucial that you stay disciplined. "Consistently, patiently, and slavishly stick with a strategy, even when it's performing poorly relative to other methods."
O'Shaughnessy believed that emotions were perhaps the greatest enemy of the investor because feelings like fear, anxiety, and excitement can cause an investor to ditch his long-term plan for hot strategies or hot stocks that turn out to be financial mirages. "We are a bundle of inconsistencies," he continues, "and while that may make us interesting, it plays havoc with our ability to invest our money successfully.... Disciplined implementation of active strategies is the key to performance."
A decade later, his thoughts about sticking with strategies haven't changed. "What always work on Wall Street is strict adherence to underlying strategies that have proven themselves under a variety of market environments."
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