As an investor, one is bound to make mistakes – some really grave mistakes too. But, it just shows that they are human too. Some innate human emotions such as fear and the desire to get rich soon lead to big blunders in their investment strategies which completely disrupt their financial goals.
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However, there are investors out there who diligently make their every move. These good investors aren’t easily influenced by such emotions. They make their decisions after a great deal of research so that they don’t end up making any big blunders. They concentrate on positive outcomes from each of their investments.
Also, when measuring success in investments, it is something personalised. That is, it depends on the person’s goals and their portfolio. As an investor, one is successful when their investment returns meet the set benchmark or the previously conceived outcome (the outcome you had estimated while building your portfolio). Don’t you agree?
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So, the big question is – what really makes a good (read successful!) investor? Well, we believe that a good investor has a mix of different traits. Let us discuss each of these traits.
They are persistent
A good investor, unlike others, is extremely patient. They review their investments periodically. Markets are unpredictable – they know this. So, they aren’t easily affected by every bullish or bearish phase. And that’s a good thing! There are many investors who panic at every market crash and close all their investments. On the other hand, a patient investor will wait and watch the markets. If they sense trouble over a long period, they will rebalance their portfolio to a new strategy to beat the markets.
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The point we’re trying to make here is that a good investor looks at the long-term. They do not give in easily to the short-term troubles. They know that their investments will grow with time and not within a few months. You get the point here, right?
They are well read
Yes! Especially when you are tackling the world of finance, you need to do your research and be well-informed about the latest trends. Otherwise, you are bound to fail or get easily fooled by anyone. So, if you want to be a good investor, you need to be an information junkie. Got it?
A good investor is always up-to-date with what’s happening in the world of finance. They read articles, participate in discussion forums and even go through good financial blogs (*cough* the BankBazaar blog). Not only does this give them a better understanding of the finance world, they can also get tips and strategies to manage their money better.
They concentrate on what’s in their hands
When it comes to investments, there are many elements that aren’t in one’s control. For example, you cannot control inflation or the markets. Or you may not be able to influence and change the currency rates or monetary policies. A good investor knows this so they focus on things that they can control.
So what do they focus on? There are many other elements that an investor should focus on. They can focus on diligently saving and investing an adequate amount of money every month without fail. They can think of ways to increase their savings and cut down on unnecessary expenses. They need to review their portfolio periodically and rebalance it if it is not gaining much. They can think about better ways to diversify their portfolio to increase its returns and minimise losses.
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See, there are a lot of other things that an investor can focus on and which are well within their control.
They have control over their emotions
It is essential for an investor to have strong emotional control. Markets are driven by sentiments. Fear and greed lead to market surges and crashes. But a good investor doesn’t allow these emotions to control his investments. Also, they have a neutral stance when it comes to winning or losing. They don’t give up on their investments because of a few failures. In short, they do not allow market conditions to dictate their decisions.
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They take advantage of trends
Warren Buffet said, “Look at market fluctuations as your friend rather than your enemy. Profit from folly rather than participate in it.”
Unlike average investors, a successful investor knows how to take advantage of trends. While most investors panic over market fluctuations, sentiments, political instability and other such crisis situations, a good investor uses these trends to their advantage because they make their money based on these panicky situations. Smart!
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They aren’t averse to taking risks
Success with investments is based on the risks you’re willing to take. If you have a high-risk appetite, you have the opportunity to grow your wealth along with the risk of losing everything. But if you have a good risk management system in place, then you can actually take the chance and gain from it too. Besides, it is not knowing what you are doing that is risky, nothing else!
They learn from their mistakes
To err is human. You can never become a successful investor without making a mistake or a miscalculation. But you should never become discouraged because of the mistakes you make. Successful investors take these mistakes as a learning opportunity. A poor investment decision is another lesson learned for them. They also learn from their mistakes and never repeat them again.
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They ignore the crowd
They aren’t influenced by public opinion. Rather, they stick to their plan and see it through. They don’t follow trends blindly, rather they question everything and seek answers for the same.
Also, though they ignore the crowd, they don’t mind getting a second opinion before taking major decisions. It is always best to get to know the good, the bad and the ugly to make a well-informed decision, ain’t it?
Now that you know the different traits of a good, successful investor, all you need to do is develop these traits and join the league.
Want to start investing but you aren’t quite sure where to begin? Mutual Funds are a good place to start.