5 Ways to Become a More Successful Investor
As an investor, you can’t ever sit back and say, “I’ve arrived.” There must be a continual pursuit of growth if you want to enjoy sustained success. But what does the pursuit of growth look like? How do you improve as an investor? Well, if you ask some of the world’s most successful people, they’ll tell you a few specific things.
5 Helpful Tips for Long-Term Success
Every investor possesses a unique set of skills, talents, and knowledge. Yet, most agree the following tips have helped shape them into the successful investors they are today.
- Don’t Force Things
Few things are more detrimental to an investor’s future than force. There are thousands of different investment mechanisms, strategies, and techniques, and forcing yourself into a particular mold may very well stifle your progress.
Think of your progress like that of a student in the Montessori education system. If you’re familiar with this system, you know that students aren’t forced to follow a specific curriculum. Instead, they figure out what they enjoy, and go from there.
Investing should be similar. It takes time to learn what you’re good at, but having the discipline to not force yourself in a particular direction will pay off in the end.
- Never Chase a “Hot Tip”
When investing, you’ll eventually get a “hot tip” from your uncle, brother, neighbor, co-worker, etc. While they may make some good points, never consider investing your own money until you’ve personally conducted due diligence. Relying on someone else’s tips rarely works out on your end.
- Avoid Recency Bias
As an investor, it’s easy to look at the current trends in the market and assume they’ll continue indefinitely. This is called “recency bias” and according to Charlie Bilello, a mutual fund manager in New York, it’s a dangerous mistake to let this principle guide your decision making.
“It’s the worst trait you can have as an investor,” Bilello says. “And it’s affecting you, unless you are 100 percent objective. Investors tend to see what’s doing well – maybe an asset class or a slice of the stock market – and we are wired to believe that it will continue, so we extrapolate the present into the future.”
- Have an Exit Strategy
It’s amazing how many investors don’t have concrete exit strategies for individual investments. Unfortunately, this failure to plan often comes back to bite these folks.
Any time you make an investment, there needs to be a plan for getting out. While the plan often changes over time, it’s always smart to have an idea of where you’re going. This allows you to stick to making calculated decisions.
- Don’t Sweat the Losses
It’s impossible to have a perfect scorecard as an investor. You’re going to lose money on certain investments – that’s a fact. The important thing is how you rebound. Do you shrivel up and pull your money out, or do you remain steady and follow the long-term plan?
For a long-term investor, short-term losses have very little impact on your overall portfolio. You have plenty of time to recover from a loss and should keep your eyes set on the future.
Never Stop Learning
The ultimate key to being a successful long-term investor is to never stop learning. While it’s easy to feel like you’re exactly where you need to be at the moment, the world has a funny way of throwing unexpected curve balls to those who would prefer to sit still.
It’s important that you’re prepared, and the only way to be confident is by continually learning.