Not unlike Olympians, investors must train themselves to control their emotions. This training begins with the development of an underlying macro philosophy one has of the market. This philosophy leads to a better understanding of one’s own risk tolerance. From there, investors can form an investment strategy and develop a set of suitable and sustainable investment rules (risk management). Lastly, but definitely not least, follow those rules. That’s it -- now perfect it!
Training, as much as it may seem like it, is not the most difficult part; the biggest challenge is accurate self-assessment. This is even more burdensome since no one likes to admit that they’re wrong. “It wasn’t my fault, the market did so-and-so.” But owning and learning from one's mistakes is a skill that -- if used, if understood, and if not discounted -- becomes the greatest tool an investor can have.
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