On March 9th of this year, the Dow closed at 6547.  It was a highly emotional time in the investment world.  The Oracle of Omaha, Warren Buffett, had commented that the economic crisis would get worse before it gets better.  Fed Chairman Ben Bernanke was repeating that the economy was in bad shape. 

Investors were bailing out, or wanted to bail out, from stock positions and were racing to the safety of short-term bonds.  Many had reached their breaking point and couldn't stand it any longer.  The stock market had lost $2.6 trillion in less than 10 weeks.  The S&P 500 was already down 24% for the year.

It looked like the end of the financial world as we know it.  Emotional?  I'll say. 

As an investor with the better part of my family's wealth in the markets, it was a very tough time.  As an investment advisor, with the wealth of my clients disappearing under my watch, it was even tougher.  Not only did I have to control my emotions, I was being paid by my clients to help them control theirs.  And it wasn't easy…they wanted out of the market.  Even my most risk-tolerant clients had reached their breaking point.

We call it "The Wall" in a marathon.  It's that time in a race, usually around mile 20, when your body has used up most of its energy and your brain is starting to rebel.  You can start to lose your ability to think rationally.  You just want the run to be over.  You don't care anymore.  Even though you know that you will regret any emotional decision you make, it doesn't matter…you just want out.

That's how it was in the investment world in March.  Even though investors were making emotional decisions that they knew they would probably regret later, it didn't matter.  Their long-term goals and their well-crafted investment policy statements didn't matter anymore.  Fear was in control.  They just wanted out.

And I wanted them to get out too.  I was experiencing the same emotions as they were.  But when they hired me as their advisor, I told them that I would help guide them through the ups and downs of the market by sticking with a long-term approach that kept emotions out of the decision making process. 

Because of the selloff in the equity markets and the huge demand for the safety of the fixed-income markets, our portfolios were out of balance…underweight in equities, overweight in fixed-income.  In one of the most difficult periods I've had in my 18 years as an advisor, I was able to summon the discipline needed to sell some of the fixed-income holdings and buy the equity asset classes to bring the portfolios back in balance with the model we had agreed to in their investment policy statement.  Believe me; it was very difficult to pull the string on those trades.

Discipline is just as important when training for, or running, a marathon.  There will be times when you just don't feel like doing the run on your training calendar.  But you need the discipline to get out the door and get it done.  During the race, discipline will help you overcome some problems that can occur as a result of race day emotions.  At the starting line, your emotions are high and you are feeling good.  You run the risk of starting out too quickly and burning yourself out.  You need the discipline of sticking with your plan and controlling your pace.  Later in the race, you may face the emotion that comes with hitting The Wall.  You need the discipline to know that you have prepared well and that you will get through the tough times.  You have to believe in yourself and your plan.

Many investors, including many of my clients, were questioning their plan in March.  But together we had the discipline to stick with it.  Now, three short months later, we've seen the US markets rally 35-45%, and the foreign markets have been even stronger.

So, what about those portfolios that were out of balance in March?  They are out balance again.  But this time they are overweight in equity holdings and light in fixed-income.  So, I am selling some of the equity positions and buying some fixed-income.  It's a strategy and discipline that forces us to buy low and sell high…which is the way this game is supposed to be played.

I'm certainly not saying that the economy is out of the woods and that it's clear sailing for investors from here.  And I'm not saying that you'll set a personal record in every marathon you run.  But, I am saying that if you follow a carefully crafted plan and apply a strong amount of discipline when the emotions of the moment are making it difficult, you will have a much more successful investing, and marathoning, experience.