The idea of becoming a successful investor is a thought many of us entertain. Seriously, how great is it to make money and then make moves that multiply your savings? In reality, many of us either don’t know what investments are best suited for our financial goals, or we don’t seem to make the best investment decisions. We may act on impulse, be too scared to take the risk, or not even know where to begin. Investing isn’t only for the wealthy traders of Wall Street, it’s essential for each and every one of us — to get us to financial independence and
There’s no secret formula for successful investing. And you don’t need extensive knowledge, or a finance degree to do it. But the most successful investors do have a few characteristics in common, which you can follow to help you better invest.
Here’s the list:
Let’s face it. Good investing is, well, boring. Ask any successful investor and they’ll tell you the same. Those who make financial decisions on a whim, or based on their emotions, can expect to take losses at several points in time. You simply can’t anticipate how markets will react. And if you’re moving your money around day after day, you’re entering very risky territory. This type of investing is better known as day trading, or better said, gambling.
Successful investors can attest to having loads of patience. They understand their timing and they know their end goals. Once they invest, they understand the process and the time it takes to watch their money grow. It’s not to say that long-term investing doesn’t come with risk, but understanding that patience is absolutely necessary, makes it less of a game and more of strategy for wealth creation.
Successful investors are knowledgable — at least, when it comes to their investments. They know their numbers, they have an investment timeline and they understand the risks involved. They’re not going to blindly jump into a deal or opportunity, because it was recommended, or suggested by a friend. They’re well-informed before making any decision regarding their wealth. If it doesn’t make financial sense, for them, they won’t do it.
Many of us are making investment decisions, without truly understanding what we’re investing in. Whether you take the word of your financial advisor, colleague, relative, or friend, investing should be as personal as a tailor-made suit. It needs to fit your financial goals and time horizon. So, steer clear of those who preach “one-size-fits-all” investment strategies. They’re simply selling an illusion or idea. And making a ton of money doing so. Remember, due diligence goes a long way.
They have common sense.
While there are ridiculous financial products out there today that literally, guarantee a negative (or insignificant) return on your investment (negative yielding bonds, anyone?), it’s our job as educated investors to realize that maybe that’s not our cup of tea. Successful investors don’t get fooled, they have a little something called, common sense.
It’s surprising to see how many people today, make terrible investment decisions, which could’ve easily been avoided had they used their noggin. Seriously, why would you invest in a 1- year CD with yields of less than 0.2%? You’re just giving the bank the opportunity to hold your funds hostage with no significant return to match the current rate of inflation! Some people just continue to lose money in scenarios like these. If this is your case, try thinking like a successful investor…use some of that brain power!
Being practical and business-savvy is so important when it comes to investing. Successful investors know this and practice this daily. They’re decisions are not affected by their emotions, or someone else’s financial needs. At the end of the day, it all comes down to money, wealth, or that “safety net” many of us so strongly desire to have. You should approach your investing strategy like a business in which your goal is to make profits.
For some of us, we make decisions based on emotional factors. Maybe your cousin is looking to flip a property, but he needs a partner/investor to afford the rehab project and you accept to help a family member out (He’s looking for an investor and I have some cash. Why not?). Too many of us do this, and if your lucky, you come out with a return on your investment, or you break- even. But what happens if you don’t? That’s the price you pay when you invest with your emotions, or sentiment. No matter what someone you care for needs, in the end, only you will be responsible for your own financial situation. No one is going to give you money if you lost all of yours through poor investment decisions.