Habits of successful investors
Contrary to popular belief, successful investing is not about “timing” the market or choosing the “best” funds. In fact, truth be told, the perfect market entry or exit time is quite a utopian concept. And the word “best” is always relative. The best stock for Mr X may not be the best decision for Mr Y’s portfolio. So, what is it that some investors do that they become so successful? Is it pure luck or is it that they do something differently.
While each successful investor has his or her own investment strategies, there are some common traits that they all share. So, if you too want to ace your investment game, here are the seven habits that you need to form.
Plan it out
As basic as it may sound, but successful investors understand the importance of a well-defined and concrete plan. It forms the foundation for a successful investment strategy. Such investors assess their current situation, identify their goals and lay down practical steps to reach there. Additionally, they assign a timeframe to this process.
More importantly, they review the plans from time-to-time and make changes wherever required. It is a dynamic process and not a one-time activity.
Diversification is critical
One key factor that has helped successful investor is diversification. It helps in spreading the risk and makes it easier to stick with the long-term plan across market cycles. One important point to note is that diversification does not only apply to the investment instrument (mutual funds, stocks, real asset, gold, etc.) but also investment styles (growth, value or blend), sectors, size (market cap) or even regions.
But beware of over-diversification as well. That can be counter-productive!
Don’t spend and save. Rather save then spend
Successful investors start saving early and do it often. Saving from an early stage not only adds more funds in the kitty but also helps growing it faster with the power of compounding.
Patience is a virtue
Rome was not built in a day. Nor was any successful investor. Patience is indeed a virtue when it comes to investments. A smart investor knows the importance of waiting it out and not losing focus from his/her final goal. A disciplined investor today will be a successful investor tomorrow.
Keep it simple, silly! Successful investors go for simplicity rather than complicated investment strategies. They know that they are in it for the long run and adopt strategies that are simple, robust and effective.
These habits will definitely take you on the path of successful investing. In a nutshell, successful investors transact less, diversity, are patient and follow a plan.
But do remember that there are no short-cuts to success. You need to give it time!
Interested in how we think about the markets?
Read more: Zen And The Art Of Investing
Watch/hear on YouTube: