I was taken aback by the question: "What is the single most important investment I can make right now?"
Not by the question itself - I get that one a lot.
But because of who was asking it and what they excluded.
It was put to me by Jason, Susan and Hao - all of whom are juniors at Skidmore College where I was lecturing last week.
They wanted to know what they - as college students - could do to ensure their financial future.
Not only that, but they specifically asked me to exclude specific investment choices that a more seasoned, older investor would consider.
I thought about it for a few minutes, then responded: "It's discipline."
Investors are faced with a unique challenge, I explained. Many are not at the mercy of the markets as they believe, but are actually subjected to the whims of the person they see in the mirror every morning.
That's why consistent investment results are often more dependent on behavior than actual performance.
Put another way, investors who "behave" themselves by being disciplined tend to do far better than those who don't.
Beating the Markets Takes Discipline
For example, DALBAR, a Boston-based research firm ,released a 2011 report that showed investors had achieved a mere 41.9% of the S&P 500's performance over the twenty years ended December 31, 2010.
In other words, investors managed to leave a staggering 58.1% on the table.
According to the report, the average investor achieved a mere 3.8% a year versus the 9.1% annualized return of the S&P 500 because they tended to jump in and out of the markets at the worst possible moment depending on their emotions.
This reinforces something I talk about all the time in my presentations around the world - investors lose billions by trying to time their decisions based on nothing more than greed, fear or simple paralysis.
In my opinion, it's why the single biggest investment anyone can make is "discipline."