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The Secret to Successful Investing: Discipline

For active investors, getting out is at least as important as getting in, and successful investing requires discipline.


Cabot Wealth Network has been providing research, insights and recommendations for individual investors since 1970. Prior to that time, most stock market activity was done by institutional investors and extremely wealthy families. My grandfather was one of the former, running Old Colony Trust which managed huge pension funds like General Motors. In that role, he had access to stock research and would also buy stocks for himself, but that was unusual.

Cabot Wealth Network was founded by Carlton Lutts who was an engineer by training, and a truly delightful person. Carlton applied engineering methodologies to investing, scanning charts, studying the financials, and scrutinizing the management teams. In fact, he created many of the investing systems Cabot’s analysts still use today, although many have evolved somewhat over the 50+ years.

And what makes a successful investing system work?


First, it takes discipline to create and improve upon an effective system. Second, it takes disciplined analysts to employ that system to generate useful and profitable insights, education, and recommendation. Finally, it takes disciplined investors to apply those insights and recommendations.

Together, these disciplines have helped our subscribers make money for more than 50 years.

Now, don’t get me wrong. We don’t always get things right. Our systems for stock picking aren’t perfect. And, our judgments and timing aren’t always perfect either. There is always risk in investing, and anyone who tells you otherwise is either lying or doing something illegal.

But each of our analysts applies some sort of system for cutting losses and taking partial profits as a way to lower risk. These may vary a bit depending on their investing strategy. For instance, stop-losses in more volatile small- and micro-cap stocks usually need to be looser.

That sort of discipline can make a huge difference. For example, our Chief Investment Strategist Mike Cintolo recommended his subscribers move largely to cash in advance of the 2008-2009 financial meltdown (as well as last year’s sell-off). His subscribers kept their powder dry while the market crashed and burned so they were ready to jump back into the market relatively early, buying up stocks that were now heavily discounted from where they had been.

So, it always catches my interest when I hear from a subscriber who tells me they followed our advice but didn’t make money, or even that they took losses.

When I probe a bit, what I hear more often than not is that they bought when our analyst said buy but they didn’t sell when we said sell.

Now, one thing to know about our analysts is that they aren’t trying to buy at the bottom and sell at the top. That sounds nice theoretically, but timing like that requires luck, and luck is not a successful investing strategy. Rather, we wait to see an uptrend getting established and buy as quickly as possible.

Similarly, after an extended uptrend, we will typically sell portions of our holdings to take profits off the table and reduce risk. And when the indicators start to look bad, we may sell out of a holding completely even if there ends up being some more upside that we miss.

Having purchased the recommended stocks when we issued a Buy rating, why don’t they sell when we change our recommendation to Sell?

What I often hear is that they felt we were selling too early so they didn’t take partial profits when we suggested selling half of the holding. And they continued to hold the stock even after we changed our recommendation to Sell.

Again, going back to our disciplined strategy, we’re not trying to sell at the very top. It’s almost impossible to guess that timing right. As a result, we often will sell out of a position, only to see that stock continue to go up for some period of time. Perhaps it rises another 10 or 15% over the next few weeks. But then the correction comes, dropping the price by 30 or 40%. The undisciplined investor got greedy … and got burned.

Here are a few rules to help you improve your investing success by being more disciplined:

1) If you are doing your own research and stock picking, have a plan each time you buy.

What’s your target price? When will you take partial profits? What’s your tolerance for loss if the price drops and your stop-loss accordingly (don’t set too tight a stop-loss or you’ll constantly stop out of stocks).

2) If you draw on others, make sure you work with someone whose knowledge and judgment you trust.

Listen to what they have to say and what their investing philosophy and strategy are.

3) If you’re following someone else’s strategy, have the discipline to commit completely.

Buy when they buy. Hold when they hold. Sell part when they do. And sell completely when they do.

4) Understand that no system is perfect.

There will be surprises and misses. Don’t overreact to losses. Don’t obsess about squeezing out every bit of upside profit.

Stay disciplined. As entrepreneur and author Jim Rohn said –

“Discipline is the bridge between goals and accomplishment.”


Ed Coburn has run Cabot Wealth Network since 2018 when he bought the company from longtime friend and colleague Tim Lutts. Ed is a graduate of Cornell University and holds an MBA from the Olin School of Management at Babson College. His career has brought him into many different sectors of the economy, from software and healthcare to transportation and manufacturing, and even oil spills. He is active in the Financial Media Association, a past Director of the Software & Information Industry Association, a member of the American Association of Individual Investors, and a frequent speaker at industry events.