Are you planning to try your hand at investing?
You’re certainly on to something. Investing is an ideal way to boost your income, attain financial freedom, and maybe even become fabulously wealthy. Most of America’s richest people are seasoned investors.
However, investing isn’t foolproof. You don’t just wake up one morning and boom, you’re making millions. In fact, lots of people have seen their investments go up in smoke
You have to be a smart investor to give yourself a great chance at investment success. But what makes a smart investor?
These are the common traits and qualities of successful investors.
Let’s face it: we all want to become overnight millionaires. The allure of quick riches is so strong that many people have lost their life savings in obvious scams and pyramid schemes.
This is why patience is such a key trait among smart investors. The hard truth is it takes several years for most investments to yield great returns.
Take the example of stock market investors.
If you invested $1,000 in Amazon stock during its IPO launch in 1997, it’d take about 22 years for it to turn into a million dollars. We can all agree that you’d need a lot of patience to hold on to the stock for two decades without liquidating some of it. An impatient stock market investor will find themselves impulsively selling their stocks prematurely.
Now, some people are born patient, and others have to learn the art of being patient. Granted, it’s not an easy trait to acquire. But with training and determination, it’s possible.
2. Focused on Goals, Not Returns
Consider these two investors:
- A makes an investment with the aim of doubling the invested capital.
- B makes the same investment with the aim of securing their retirement.
From a broad view of things, you can say that both investments have a goal, just different. On deeper analysis, you’ll conclude that A is focused on returns while B has a specific objective or goal.
While it’s still okay to be return-focused instead of goal-focused, what you choose can mean the difference between being a smart investor and a not-so-smart investor.
Case in point: if you take A’s approach, you will be more inclined to close an investment once you’ve earned the targeted amount of money. All good, but what if the investment had the potential to grow 10x? You’ll miss out on the opportunity to make even more money and grow your wealth.
When you’re goal-focused, you want more than just returns. You want to maximize the value of an investment. That’s why intelligent stock investors don’t sell their stock until they’re certain a bull run has come to an end.
There’s another important benefit to being goal-focused. It helps you become more patient. It usually takes longer to achieve an investment goal vs achieving a return, so being in something for the long run teaches you that patience pays.
3. Always Ready to Learn
There’s a reason people go to college to become investment advisors. The world of investing is incredibly vast that it’s hardly possible for one person to master everything. Smart investors acknowledge that their knowledge is limited and are always eager to learn something new.
As a general rule of thumb, you should only invest in what you know. If your focus is on the stock market, for example, don’t be quick to jump into the cryptocurrency market just because it’s the newest craze. That’s how some people have lost fortunes in crypto.
Like an intelligent investor, take your time to learn about a new investment market or opportunity. Now, this doesn’t necessarily mean you enroll in a business school. In today’s digital age, there are many online resources, from YouTube to Podcasts, you can use to enhance your investment knowledge.
Staying abreast of business and financial news is also key to being a smart investor. Knowing what’s happening around the world will put you in a better position to make sound investment decisions.
4. Great Financial Discipline
Warren Buffett, one of the world’s richest people and experienced investors, has two rules of investing: one, don’t lose money, and, two, don’t forget rule one.
Unfortunately, losing money as an investor is arguably the easiest thing. If you make a dumb investment decision, it won’t take long before you’re parted with your money. And if you keep losing money, you won’t have anything to invest.
Capital preservation is crucial, and you can only pull it off when you have great financial discipline. Successful investors know how to budget their personal finances, manage debt, and plan for emergencies or unexpected events.
Your test of financial discipline will come after your first big investment win. Without great discipline, it’s easy to bask in the glory of your winnings and blow away the money. A smart investor will maintain a frugal lifestyle and re-invest most of their earnings.
5. Utilization of Technology
There’s a group of old-school investors who say they don’t rely on technology but don’t take their word for it. They have a team of tech-savvy workers who do most of the work behind the scenes.
Today’s new-age investors make the most of the tech tools available to them. Why would you spend most of your time studying countless stock market charts when there are tech tools that will do the analysis in seconds?
That being said, be diligent about your use of technology to make investment decisions. For example, while stock-picking services will give you investment recommendations, you still need to use your knowledge the evaluate the soundness of those recommendations. Find more about how to make the most of stock-picking tools.
Be a Smart Investor!
For many people, investing is the key to building a fortune. However, it can also leave you worse off than when you started. Being a smart investor is what makes the difference.
If you’re just getting started as an investor, you now know some of the most important qualities you need to develop. A readiness to learn is one of those qualities, and you can keep yourself informed by keeping tabs on our blog.