Mental toughness for investors

28 Aug 2015

By Darren Higgs

The investment markets have had a pretty good run over the last few years. A lot of people have forgotten about the events of 2008 ('what Global Financial Crisis?'). However, a little bit of nervousness has entered peoples' minds with fears around Greece and China. I will not go into those topics in this article, as some of the issues are over-blown and they have already been priced into the markets (so it is needless to worry now).

What I will discuss, however, is your test of character. When you need to stick solidly to your financial plan, do you just find a way or do you lie to yourself? Do you look at 'media noise' as a defeat or a challenge?

Once you have made a commitment to yourself, be it family, work or your finances, you need to be resolute in completing all of the actions you need to succeed. Some people call this 'mental toughness'. Mental toughness keeps you going even when you get nervous or you want to find a way to follow the herd. Here are some attributes needed to make your mind as solid as the financial plan that has been designed for you.


Motivation to create wealth or protect what you have is the easy part. You can read an inspiring article and get motivated. However, motivation does not keep you going. Commitment does. Mentally tough investors know exactly what is important to them about money and what they want to achieve and are committed to making it happen. When you are resolute, you make decisions that service your ultimate goals. When you are committed to yourself and your family, you will make decisions (even uncomfortable ones) that achieve the things that are important to you. When you always remember what is important to you/your family and don't get side-tracked by market and media noise, it's not a matter of if you accomplish your goal, but when.

To help with commitment, be ready to accept whatever the day throws at you. Negative news from the internet or TV? Tough day in the office? Traffic on the way home? Doesn't matter. Simply accept that there will always be obstacles in your way, but don't let them stop you from doing what you need to do.

Alternatively, if you are just too busy or you find yourself getting swept up in the noise and emotions, outsource your financial affairs to a professional adviser. They will take the emotion out of the decision making process and navigate your affairs back to what is important to you.


The people that most investors look up to can all perform smoothly under pressure. For example, have you ever seen Warren Buffet look flustered? They can also perform consistently. As investors, you must stay in the present moment, keep your focus on the things you can control and not be distracted by anything or any news that is not in your financial plan.

It is not easy to stay in the present moment, as your mind tends to wander quite easily. Mentally tough investors practice being present. This helps them keep their focus where it needs to be. Their financial plan also has contingencies to deal with adversity so that, when it does happen, they can remain composed while dealing with adverse circumstances.


Physical fitness can be gauged by how quickly your body recovers between workouts. Mental fitness, on the other hand, can be gauged by how quickly you can regain your composure after setbacks. There is a good book called 'Who Moved My Cheese' that is all about assessing ever-changing circumstances, adapting and overcoming. In other words, embrace change. You are not defeated by setbacks. There is no demand you or a proper financial plan cannot meet.

As a long-time financial adviser, the biggest groans I get is when I recommend something that may be contrary to media reports. For example, recommending shares after the GFC met with a lot of resistance. However, look at how well shares and other growth assets have gone since early 2009. The funny thing is that a smart financial adviser does not come up with your financial plan. You actually come up with your own financial plan by letting us know what your goals and cashflow are. We simply point you in the right direction and stop you from jeopardising your own goals.

When (not if) I make recommendations contrary to popular opinion, use this as a chance to practice your resilience. Listen to the negative self talk and try to reverse it. Instead of saying 'this will hurt' or 'I hate doing this', change it to 'every recommendation is making my financial plan stronger'. Do not feed your doubts but rather build your strengths.


Every thought you have is a message for you to consider. This is particularly so with your finances. Are you sending messages of doubt or are you sending messages of empowerment? Are you telling yourself you can follow your personal financial plan, no matter what? Investors must have an unbreakable belief that they can accomplish what their financial plan says they can do. There is never failure, just simply learning. And once you develop that learning mindset, you just want to achieve things more and more.

Think positively about changing your future. Furthermore, think about how good that change will feel to you. Now, coming back to reality, imagine how good your attitude will be to the financial tasks at hand when you are already feeling good about the change it will make to you.

On the flipside, when you get stuck in patterns of negative emotions, it is hard to turn them around. I have felt that way at times. I'm sure we all have. That is why it is good to have a strong support network to help you on your financial journey. And when everybody else is positive, it helps you stay calm and in control.

Mental toughness is like a muscle that needs exercising. It is not just one muscle but lots of muscles that need training. The beauty of mental toughness is that it is not bestowed upon a lucky few, it is something that you can work on over time. And it will also help you for the rest of your life.

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