Personality Traits of the Best Investors
If you want to achieve good investment returns, you need the right temperament. Successful stock market investors have several traits in common. Here are some.
- Patience. Some of the best investors in the world have this key characteristic. Knowing how to not enter into a purchasing frenzy and therefore overpaying for some deals. Waiting is a quality, and frequently is a way of getting a bargain. Easier said than done, because nowadays with all the information available fast and free, it’s increasingly difficult to wait for the right time. It’s the ability to tune out the noise.
- Keep it Simple. Another top quality is to prefer simple and easy to understand investments. Overcomplicated products can lead to messy situations, where you don’t know what will you do if something unpredictable happens. Warren Buffett once said something brilliant and beautiful about keeping it simple: “buy a business so simple even an idiot could run it because sooner or later, one will” and “invest in what you know“.
- Learn. As much as you can. Highly successful investors are proactive learners and are always trying to learn different perspectives to see if their theories hold up. They are also voracious readers. (Read more: How to Invest – A Free Tutorial For Beginners)
“Read 500 pages like this every day,” Warren Buffett said to the students while reaching toward a stack of manuals and papers. “That’s how knowledge works. It builds up, like compound interest. All of you can do it, but I guarantee not many of you will do it.” (Investing class at Columbia University on the value of reading.)
- Staying the Course. Every single year for the rest of your life you will hear a top investment that will be the next big thing. Frequently those recommendations end in flames. From Ponzi schemes to huge hype surrounding bad ideas, I’ve seen it all. A good investor knows how to stay the course, and keep investing in good (and well proven) strategies. (Read more about Passive Investment Strategy)
Those investors who are willing to stay the course tend to outperform the majority of traders, who let the emotions drive their business and investment decisions.
A Simple Strategy…
…to invest for the long term, and to not let the emotions get in the way. (Only for information purposes. Not advice. Of any kind.)
- Invest in a diversified portfolio of stocks and bonds (use ETFs to your advantage);
- Minimize your costs (choose exchange traded funds with a low TER)
- Set a % for your stocks and another one for your bonds (e.g. 60% Stocks and 40% Bonds)
- Rebalance once a year
- Switch off the stock market news
- Ignore Ponzi schemes
- Go to the beach and swim (in the summer). Or drink a cappuccino while reading a book (winter). Or whatever you want with the rest of the time. (This strategy only takes about 5 minutes per year).
Here’s Warren Buffett (again):
“We never recommend buying or selling Berkshire. Among the various propositions offered to you, if you invested in a very low cost index fund — where you don’t put the money in at one time, but average in over 10 years — you’ll do better than 90% of people who start investing at the same time.”