Smart Investors Have These 6 Traits — Do You?
It's hard to be a good investor. By some estimations, only 20% of people involved in the investment business are successful in their own investing endeavors.
And while there are careers' worth of research and education that go into making savvy investments, in the end, much of it may come down to character traits.(See also: A Lot of People Don't Really Understand What an Investment Is — Do You?)
So check out this list of characteristics successful investors must have, and see how you stack up before hitting the market.
1. Smart Investors Are Patient
To be successful in investing, you need to be patient. In general, the market rises slowly, and you have to be willing to take the long view of your investments in order to see them grow. If you believe in an investment and you have done your research on it enough to know that it's a wise buy, then you have to be willing to wait to see your return.
A lot of investors, especially new investors, fall into the trap of checking on their investments several times a day. It's hard to be patient when you're seeing all the little rises and falls that many investments take every day. So keep yourself away from the computer if you can, or at least limit the number of times a day you check in.
2. Smart Investors Are Planners
Before they even buy an investment, smart investors have a plan. They know what their ultimate goals are and they have some idea of how they want to get there. They know the benefits and drawbacks of different types of investments, and they know how to choose between them. To a certain extent, they also have contingency plans. They know how to access money if they need it, and they know what they will do if the market crashes or a particular strategy doesn't play out.
If you don't feel confident in making your own plan, it can be worthwhile to consult with an investment professional you trust. While this will cost something, it gives you the chance to get an opinion from someone who has more training than you do. If you're wary of getting a biased opinion, interview several professionals before you decide who to work with. Make sure you feel like you can trust someone before you take their financial advice.
3. Smart Investors Are Disciplined
Smart investors know that their plan is better than any impulsive ideas they might have with their money, and they have the discipline to absorb those ideas and stick with their plan anyway. They know that something that looks too good to be true probably is, and they know that their plan is probably better in the long run, anyway. These investors keep their long term goals in view whenever they're thinking about their money, and they don't do anything that might keep them from achieving those goals.
If you struggle with discipline or you aren't sure you will be able to stick with your plan, find an investing buddy. This can be a spouse or a close friend. It should be someone who you feel safe sharing your financial situation with. Then, you commit to talking to them about anything before you make a change to your investments or strategy. This can help you think long enough to realize something might not be a good idea, and it gives you a chance to have accountability for making good choices.
4. Smart Investors Are Ambitious
Ambition helps you find success in many parts of life, and investing is no different. Ambitious investors are willing to take as much risk as they can afford, so they can reap a maximum benefit when their investments pay off. They push the envelope in order to achieve their goals, because their goals are high and there isn't a better way to achieve them. This also pushes smart investors to stay in the game and enhance their understanding of what works and what doesn't, so they can do what they set out to do.
If you struggle with ambition, start working on developing positive feelings about yourself. People who feel good about themselves are more likely to be ambitious. This makes a lot of sense. When you feel good about who you are, you will feel good about what you can do, both now and in the future. If you don't feel good about who you are, you won't be ambitious because you will feel like there's no way you can achieve those goals.
5. Smart Investors Are Adaptable
A smart investor needs to be able to adapt to changing market conditions, new trends, and different ways of doing business. They need to be able to evaluate these in light of their long term plan, to decide when, how, and to what extent they should incorporate new things into their overall investment strategy.
But wait? Didn't I just say that investors need to commit to their strategy in spite of distractions? Smart investors know the difference between a fleeting trend and a new way of doing business that is around to stay. Sometimes this means observing for a while before they jump in. Other times, it means trusting their intuition, and that of any investment advisors or friends they might have. It also means jumping in in a smart way — this can mean starting small, investing only a small portion of their overall money in something new, and being able to articulate how the new ties in with the old and enhances their investment plan.
6. Smart Investors Trust Their Intuition
Intuition can be a testy thing, but smart investing means, sometimes, trusting in a way of knowing that is separate from rational understanding. This is different than trusting in your wishes or your hopes or your dreams. Intuition seems to be an alternate way of knowing things, a way of seeing problems and solutions that cuts through a lot of the clutter that "thinking rationally" can provide, and knowing an answer without necessarily knowing how you got there. That doesn't mean that something known intuitively doesn't make sense, but that the knower won't necessarily know how it makes sense.
If you don't yet know which of your thoughts are intuition and which are hopes, dreams, or wishes, take some time before you make decisions based on it. Instead, note the ideas that you have, the things that seem to stand out or financial decisions that seem like they might be a good idea even though they're different from your usual way of operating. Then keep track of how those decisions play out. Over time, you'll learn which impulses are intuition and which ones come from some other internal place.
Do you consider yourself a smart investor? What trait do you have that makes you a better investor?
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