What do Warren Buffett, Peter Lynch, and Jack Bogle have in common? More than just being some of the world’s most renowned investors, they have some key personality traits in common that can be partially credited for the reason why they are such successful investors.
In this article, we will be looking at the traits that make for a great investor and how you can adapt to have these traits going forward to help you become the best investor you can be.
Traits That Make For A Great Investor
Countless studies have been conducted and books have been written about the importance of the traits needed to achieve your goals in the stock market. Below are the most important traits to implement if you want to be a successful investor.
#1. Goal Setting
Similar to going into the grocery store without a list, you wouldn’t start investing without goals. This is why it is so important to set clearly defined goals prior to putting any money into the market. When I say clear goals, I mean ones that are tied to a timeline and have a general path of how you plan on getting there. Oh – and it’s even better if you write these goals down. Check out this study conducted by Harvard MBA students that prove that writing down your goals actually proves you to be 10 times more likely to succeed 10 years down the line than those who didn’t write their goals down.
#2. Welcoming Risk
Now, this is not to say that your whole portfolio should be invested in triple levered ETFs however the greatest investors are OK with taking some risks. The keyword is some. They aren’t risking it all but they also aren’t being so conservative with their money that they are not OK with moving anything. There is a healthy amount of risk and it depends on you and your goals.
To welcome risk you also need to overcome fear. This means that you cannot pull all your money out of an investment when you see it tanking and are scared. You cannot let fear make your decisions for you. Instead, you have to act using only logical information and facts. That said, you need to recognize when you should be taking high risk for a greater return.
In the end, there are no guarantees when it comes to investing right? It is also a bit of a financial gamble.
#3. Continuous Education
One of the best things you can do if you want to keep improving your returns is furthering your education on the market. This can be done by reading, watching videos, taking courses, attending seminars, etc. Those who are most successful become incredibly well-versed in market history, common trends, any and all terminology plus other markets, not just the U.S.
If you want to start educating yourself, there are loads of free articles and resources on the internet. If you check out EdX, there are a plethora of free online courses taught by top professors from renowned universities.
Almost something very important to note is that failures are education too. You could even consider them the education that you are paying for if you have lost some money. These failures should be considered another degree. It should enhance your knowledge and improve your skill set so you can become a better investor.
#4. Be Humble & Practice Patience
Warren Buffet is worth almost $72 billion yet he still drives a 2014 Cadillac XTS. He could afford any car in the world, but he drives one that makes the most sense for his wallet. If you want to really see great returns from your investments, practice being humble. Don’t splurge on nice watches, cars, and wallets. Instead, put the money you are making back into the market to make even more money down the line.
That said, know that the odds of you becoming a millionaire overnight are very slim. You need to be patient with the process of wealth building. It goes hand in hand with what was mentioned in the above blurb but by investing all the money you can now you are creating a bigger return later. Also, be patient with market timing. If one of your investments in tanking and everyone else seems to be selling their shares, really do your due diligence to see if that is the best idea for you. Again, use logic not fear to make this decision and practice patience by watching the outcomes of others’ choices prior to making a mistake of your own.
There isn’t much instant gratification in this game. Just lots of hard work, patience, and humility.
#5. Be Realistic Yet Positive
Don’t just daydream all day long about what life would be like if (inset your dream life here). Instead, you need to be using your time wisely and putting in the necessary hours to build your dream life. However, that said, it is still incredibly important to be positive and visualize your goals. Just don’t be dreaming about them all day long so no work is getting done.
You want to visualize them enough so that you can see yourself attaining them.
Side note: realistic doesn’t mean letting analysis paralysis stop you from investing in something extraordinary. It just means knowing that you may not get to your goals tomorrow, but if you stick to your plan you will reach them sooner than you expect.
#6. Track Your Personal Performance
This is key. Track how you are performing, what the outcomes of all of your decisions are, and analyze your performance. Do you seem to be making the same mistake or are you working in some sort of pattern? You really want to analyze this to be able to note any of your weaknesses so you can make sure you are hedging against them. After all, if you want to be the best investor you can be, you need to know exactly what flaws you are prone to and how to fix them.
#7. Constant Gratitude
While you are working to achieve more than what you have now, always be grateful for how much you do have. There are plenty of others who would love to trade spaces with you. Be willing to give back in many ways, whether it is knowledge transfer, time, or money, it is important to recognize your own blessings and share with those who are far less fortunate.
#8. Always Have An Exit Plan
ALWAYS HAVE AN EXIT PLAN. This cannot be emphasized enough. Always plan for the worst but hope for the best. You need to fully understand what your actions and steps will be if the worst does happen. How will you still profit or how will you cut your losses so they aren’t devastating?
This is vital and something that every single investor I have ever met always says, no matter what, always know your exit plan.
Final Thoughts
These 8 key points listed above will seriously help you improve your investing skills and even could help increase your portfolio returns if you are practicing them daily over a period of time. There is no doubt in my mind that these are the 8 top traits that make for a great investor.
Have you found any other traits vital to the success of your investing career? Let us know in the comments!
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Gina DiMasi
Gina DiMasi is an organizational finance whiz. Gina is an avid investor, educator and aficionado of bitcoin and other modern investments. In addition to being an all around nice person, Gina has a degree in personal finance studies from Framingham State University. When she's not running numbers or blogging up a storm, Gina actively volunteers with Habitat for Humanity.
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