Sunday 2 September 2007

Characteristics of Successful Investors

"The only question to ask yourself is, how much are you willing to sacrifice to achieve this success?" -Larry Flynt


Successful investors rely on simple and uncomplicated routines which
help them keep track of their past, current, and potential financial
situation. The maintaining of specific routines and habits are
qualities of successful people not just investors.

The ability to exhibit self control and passion all at the same time
is not something that all people can do. But the ability to combine
both is found in the personalities of all successful individuals.

Characteristic #1: Keeping a Journal

Most successful investors have keep a journal. Buy yourself a cheap
school notebook and keep a list of all your trades. Then write down
brief notes about what happened in the market, the result of the
trade/investment, and what your thoughts were about it.

While this might not seem helpful in the present, it will in future.
When a similar situation occurs or you are thinking about
reinvesting, you can quickly leaf back to that particular
trade/investment and have all the information you need without having
to redo research.

It is through this journal that an investor can learn from past
mistakes and write down their thoughts in the moment. Trading is
equal parts research and what you feel in your gut. In hindsight,
you can gather new wisdom and insight you may not have had at that
moment.

Characteristic #2: Avoid Over-Analysis

Do not over analyze your stock investments. Especially for long term
investments, daily monitoring is not just unnecessary, it is a waste
of time. Most successful investors examine their stock portfolios
quarterly and at the most, every month.

Watching your investments daily, can lead to paranoia and fear over
the normal ups and downs of the stock market. Investing is a long
term activity and does not need to be watched daily.

Characteristic #3 : What is Success to You?

Determine how you define success. For some people, success means
being a crorepathi, while others view success as slowly making a
profit from long term investments. Warren Buffett, one of the
world`s greatest investors, has said that he believes success, for
himself, is not losing money.

Many financial professionals use yearly percentage of return as a way
to measure success. An average 15% return on all stock investments
is a good sign that you are doing well and profiting.
Successful investors understand that sometimes they will make a bad
decision and they will lose money. In the end, successful investors
are those people who have made more money than they lost. Many
investors and businesses actually build `failure money` into their
budgets.

Once you come to terms with not winning all the time, you will have
less fear of investing. Less fear means you make decisions based on
research not emotion.