10 Traits of a Successful Investor

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Successful Investors are made, not born. They have a high level of self-awareness. After Studying Successful Investors across the globe, we find that all of them have 10 common characteristics. Why not start adopting them today?

1. They know their risk tolerance: Successful investors have a high level of self-awareness when it comes to risk tolerance levels. They do not invest in assets that exceed their risk-Caring Capacity, as they know that this may drive irrational decisions.
   
2. They understand and accept volatility: A clear understanding of the “No Risk, No Reward” principle is another defining quality of a Successful investor. Rather than shying away from volatility altogether, Successful investors take time to understand the risks involved in an investment and accept a certain degree of volatility as “growing pains”
   
3. They are decisive: When the time comes to make a decision, Successful investors act! Hours of evaluation and study are pointless if one cannot eventually make a firm go/no go decision. Sitting on the fence only leads to missed investment opportunities, and Successful investors understand that.
   
4. They are “Actively Passive”: The above oxymoron is a key defining characteristic of Successful investors! They actively scout Good investment opportunities and spend significant time evaluating options and building out their portfolios. However, once an investment has been implemented with a certain time frame in mind, they turn relatively passive and do not frequently churn their investments.
   
5. They ask questions: Successful investors understand that it’s better to ask a few extra questions than to regret (or get locked into) a poor investment. They are inquisitive, and make sure they gain clarity on all the so-called “fine print” – fees, exit charges, lock-in periods, risks, alternatives, commissions, premature termination options, and everything else there is to know.   They also conduct their independent research and check back with unbiased sources before making a final decision. In other words, they educate themselves!
   
6. They avoid speculation: Successful investors differentiate between “speculation” and “investment”, and avoid the former (although not all together) and put emphasis on the latter. Buying a stock as a tip from a well-meaning friend (or for any other unfounded reason) is not very different from gambling, and has a 50-50 chance of success. Although it can be fun & exciting when done within limits, speculation never forms the core investment strategy of a Successful investor – in other words, it never takes the place of solid research and rational judgment.
   
7. They keep emotions in check: The best investors are great contrarians and firmly follow the Buffet principle of “buying when others are fearful and selling when others are greedy”. They appreciate that their own emotions (specifically greed and fear) can function as their worst enemies and lead them to make the wrong investment calls. Successful investors recognize that the “point of emotional capitulation” is also the “point of maximum financial opportunity”, and vice versa. They neither panic nor rush to capitalize on momentum-based trends.
   
8. They are realists: Successful investors are masters of “viewing situations as they are”. They enter investments with tempered expectations that are in line with long-term trends within an asset class. For instance, good stock market investors will buy a stock portfolio aiming to achieve annualized returns of 15-20% over a 5-7 year period. If an unusual, sentiment-driven bull market pushes their annualized returns to 50% or more in a year, that may prompt them to rebalance and book profits, but their expectations of the future will not change significantly. Successful investors have learned to shut out the noise emanating from news channels (that is primarily meant to sensationalize) and calmly evaluate investment avenues based purely on what data and logic say about the “current situation”
   
9. They diversify: It can’t go without saying that Successful investors do not put all their eggs in one basket. They spread their assets across multiple investment avenues in line with their risk tolerance and never overextend themselves into one particular asset class just to “ride a wave”. At the same time, they do not over-diversify to the point where returns from all asset classes cancel each other out – leading to poor returns!
   
10. They think long term (but not too long term!): Mark Zuckerberg once said – “I like to pride myself on thinking pretty long term – but the not that long term”. That’s a good philosophy for investing as well. While “long-term thinking” is a core tenet of successful investing, that doesn’t mean that one shouldn’t take stock of things every once in a while. Now and then we come across clients who haven’t rebalanced their portfolios in years, and this has been to their detriment. Successful investors take a long-term view of an investment but periodically check back to see if better options exist within the same asset allocation and risk tolerance thresholds, or whether the investment climate has undergone material changes.

Conclusion

Investing can be daunting, but adopting good habits inspired by successful investors can help you build a strong financial foundation, achieve your financial goals, and navigate the markets with confidence. Remember to spend with a plan, save aggressively, invest with a vision to achieve personal goals, and have an alternate Plan B. May investing success always be yours.

The most important part of a plan is planning on your plan not going according to plan – Morgan Housel

According to a survey, one common thing among all successful investors is their seemingly simple habits of investing. Some important habits of successful investing include consistency in investment, sticking to a financial plan and diversification. A strong mindset of investing regularly with discipline is what made many investors billionaires successful.

Secrate of Most of the Money made in the market by a Successful Investor is the outcome of the Behaviour of an Investor.

Another article in Economic Times India states that most successful investors have a well-crafted investment strategy that comes from thorough research or experience, and they stick to it. Be it a focused approach, diversification and asset allocation, or goal-based investing, they follow it without being bothered by market noise and random advice from various sources.

After all, the whole point of investing is not to earn more money than average, but to earn enough money to meet your own needs – Ben Graham