7 Habits of Successful Investors
The largest dichotomy in investment is the difference between the investment returns and the investor returns. This is also called the behavioural gap. Apart from this there are many things that set apart successful investors from the others. I am trying to list 7 habits of successful investors here:
1. They have a strong emotional control:
The markets run on emotions of greed and fear and to have a control over them is one of the important factors in deciding how successful you will be as an investor. With huge influx of data in various forms of media, it is tough to decipher the information which is useful and the one which is not.“The information you have is not the information you want. The information you want is not the information you need. The information you need is not the information you can obtain. The information you can obtain costs more than you want to pay.” – Peter L. Bernstein
2. They thrive on Risk
A ‘risk’ is present in probably everything in life. A smart investor understands that chance of succeeding anything in life is 50:50, but he would put strong risk control measures. Risk has to be managed and not to be avoided
3. They understand value
Value is everything, price is nothing. Sometimes a market correction may be a trap if you are trying to seek price. One has to know the intrinsic value of the investment rather than become a trader by trying to get the right price. A good company will never be available cheap and no price is cheap for a bad company
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4. They invest for the long run & plan inter-generational wealth
There could be a debate on what is long term but one has to just understand that investment portfolios are largely perpetual. One may derive income from it or use it partially to fund goals but eventually some part of the portfolio will always remain invested
5. They learn from their mistakes
Successful investors understand the fact that they cannot avoid mistakes, but they try to learn from them and understand that every loss teaches a lesson and they take it in their stride to make better investing decisions in the future
6. They understand equity is a wealth creator
Business is the highest return creator and people who understand this know that they will either put money in their business or buy other businesses (Equity). In the longer run nothing has beaten equity and it will continue doing so
7. They concentrate on Portfolio Returns
Successful investors do not get entangled in scrips or schemes or asset classes, but look at overall returns their entire money is making. This habit also helps them over diversifying and maintaining a manageable portfolio
The bottom line: To make your portfolio work for you efficiently, one must adapt best practices and the best practices are mostly hidden in behaviour rather than in the markets.
The financial world is always very dynamic, but the above habits of investors make them successful. Build a smart plan, stick to it, save enough money, select reasonable investing options and always be aware of taxes. Adopting these necessary habits for investing can definitely make you a successful investor.
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