Everybody wants to become a successful investor but very few take effort to learn the nuances to become one. Remember that successful investors are not born, they acquire these traits over time. Many times, people mistake these traits for common sense which is not right. One needs to put conscious effort to acquire these traits and apply them religiously in their day to day investing decisions.
I am listing a few traits which could be helpful to an investor.
- Knowledge Seeker – One needs to be hungry for knowledge. The investing world is constantly changing where financial institutions are regularly coming out with innovative products to fulfil the customers need. Yesterday’s knowledge is insufficient for tomorrow’s portfolio. The digital world has enabled customers to invest anywhere in the world residing at one location. If we limit our knowledge and investment to a particular country, we will miss out on golden investment opportunities abroad.
- Applies Knowledge – Knowledge is of no use unless it is put into practice. I have seen people who are informed but do not have time or intent to use this knowledge to their advantage. Applying knowledge also allows you to validate your own learning.
- Takes Calculated Risk – If a person wants a relatively higher return on his portfolio, he will have to take higher risk because risk and reward go hand in hand. While high risk can improve return, it can also result in deep losses. Hence, it is important to understand which risk to take and how much risk to take.
- Avoid Greed – Greed is a common vice for many failures. In the case of investment, it can have serious repercussions on the financial well-being of a person if not managed well. Greed could be because of various reasons, the predominant being a person desiring to make a lot of money in a very short period. The initial market-beating performance can create a false sense of belief that an individual can beat the market. It encourages investors to take higher concentrated risky bets resulting in irreversible losses and sometimes permanent setbacks.
- Humble – This is the most important trait of an investor. Market performance is dependent not only on the company’s performance but is also dependent on the views of potentially ~7-8 billion investors. To realize that a person has limited knowledge and he cannot beat the market consistently is a very important realization. This keeps the person grounded, helps him set realistic portfolio performance expectations and encourages him to make a rational decision.
- Learns from Mistakes – Investing is never right on the first try. It is OK to fail but the failures must be at an early age when stakes are lower and there is a higher appetite to take risks. The failure is a boon for those investors who learn from these failures and apply that in future investments.
- Patient – Patience is the virtue of an investor. Many financial decisions go wrong because we are in hurry to make money and investment takes time to grow. It is not advisable to set an unrealistic expectation of achieving financial goals faster. It forces us to take unrealistic decisions putting our financial independence in jeopardy.
I am in the process of acquiring some of these traits. Do you have these traits to become a successful investor?
The writer is a SEBI Registered Adviser and Founder of FinMyn (https://finmyn.com). He provides Fee-Only Financial Planning and Investment Advisory services.
He has advised many clients in India, the US, Europe, the Middle East, South East Asia and Australia.
To know more about him, click on https://finmyn.com/about/.