As with any walk of life, there are certain traits successful players in the investment world tend to possess. The first is a huge amount of discipline, with successful investors usually having an ability to focus on what matters, rather than what’s interesting or what feels right.
For example, disciplined investors won’t usually become overly excited or downbeat about their portfolio performance. Instead, they’ll be rather business-like about their investments and focus on the facts and figures as opposed to emotions. This can help them to more accurately ascertain whether a company is worth buying or selling, thereby providing them with a sound basis for all of their decisions.
It can also mean that they’re better able to buy when other investors are feeling fearful, and to sell when other investors are greedy. That’s because they’ll have a hold on their emotions and use a disciplined approach to investing not dependent on following the herd of other investors. As history has shown, buying a stock because it’s popular (or selling when a company’s shares are unpopular) can lead to major losses and a feeling of being at the mercy of others, rather than having a sound rationale for each investment decision.
Successful investors are also honest about their ability and the prospects for their investments. In terms of the former, no investor is perfect and nobody knows everything. This means that all investors are flawed whether that’s in terms of ability, a lack of time or any other reason. A successful investor will acknowledge such weaknesses and seek to manage them rather than simply ignore them. For example, an investor with a lack of time may wish to buy funds or use an investment service, while a lack of ability may be remedied by learning more from the likes of Warren Buffett and Ben Graham.
Similarly, successful investors are also honest about the returns they’re seeking to achieve. We would all love to treble our money overnight, but that’s extremely unrealistic and will lead to huge risks being taken. It can pay to have more limited expectations and this may allow for more sensible investment decisions that prove to be right ones in the long run.
A Clear Strategy
While there are a number of different strategies available to an investor, most successful investors tend to stick with a core set of fundamentals. For example, they may seek out undervalued stocks, higher yielding companies or shares with consistently high bottom-line growth numbers.
This doesn’t mean there’s a lack of flexibility and clearly all investors improve and evolve throughout their investment careers. However, it does mean that chopping and changing what makes for a good investment is perhaps not a good idea, since it can lead to a lack of focus on the bigger picture. Furthermore, it can also lead to a confused state for the investor as they struggle to concentrate on their long-term investment goals.