Putting it mildly, there are a handful of textbooks and articles written on what it takes to become a successful investor. There are a number of traits which make some investors more successful than others – for the inexperienced investor, investing requires courage, discipline, being able to listen to advice, as well as patience – for the experienced investor there is a long list of traits which we feel makes one investor stand out from the other.
Below, I will try to list the most important traits which are imperative to gaining experience in this field and make the reader comprehend the intricate concoction of traits required to distinguish one investor from another.
1. Willingness to learn. Learn and educate on your own initiative - read, read and read. Articles, newspapers, book and journals. Attend seminars. Keep abreast with market developments. Invest in educating yourself, in having a strong financial background.
2. Have a target investment horizon and plan your exit strategy. This requires discipline, but is essential for preserving gains and serves as a buffer for when market sentiment turns, abruptly, to the downside.
3. Be patient. When taking a calculated decision on an investment, take the necessary time to reap the benefits of that decision and not panic on short-term market-driven volatility.
4. Learn to control your emotions. Markets are driven by sentiment. Fear and greed is what drives the average investor and ultimately leads to the herd-instinct. A good investor is not influenced by media headlines.
5. Have a clear defined investment strategy. Every investor has his/her unique investment style, and that is fine, but the successful investor will develop his/her own investment strategy, such as based on technicals, fundamentals, short-term strategies, long-term strategies, etc.
6. The trend is your friend. It does not matter if you are a value investor or day-trader, the trend is most likely to help you in your investment decisions. Warren Buffet stated; “look at market fluctuations as your friend rather than your enemy – profit from folly rather than participate in it” Identifying a market trend enables investors in using the trend to their advantage and could facilitate the decision to exit from a trade.
7. Stick to your investment strategy. Do not abandon it half way and move to another. Average investors tend to lack persistence and have a habit of to giving up just when they are about to achieve success.
8. Take risks, consciously. Risk-taking is where the real money is made; not knowing the risks you are taking is dangerous. Tweak your investment strategy to include risk management techniques such as hedging.
9. Learn from your mistakes. This is one of the traits which is crucial for investors to gain that much needed experience. You can never become a successful investor without making mistakes, the most important thing is to take them as part of the learning curve and not get disheartened by them and view them as an opportunity to move on.
10. Be passionate on investing. People are passionate on hobbies, sports, their favourite teams. Why not becoming passionate on investing? Investing can be viewed as a game on how to make money, be passionate, the results will follow.
Disclaimer: This article was issued by Mark Vella, investment manager at Calamatta Cuschieri. For more information visit, www.cc.com.mt. The information, view and opinions provided in this article are being provided solely for educational and informational purposes and should not be construed as investment advice, advice concerning particular investments or investment decisions, or tax or legal advice.
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