One of the keys to successful investing is to avoid costly mistakes that can take months or even years to recover from—that is, to win by not losing. And the best way to avoid investment mistakes is to adopt the habits of successful investors. You can begin very profitably by cultivating these three personal mental strengths:
- Patience: Good chess players never “go for broke,” as the saying goes. Instead, they position their pieces so they can profit from the mistakes they expect from opponents who are less talented, less experienced or less patient. Successful investors follow a similar approach. The crucial difference is that they have no opponents who can be relied upon to make the wrong move. Instead, successful investors try to arrange their portfolios so that they can more or less automatically tap into the steady profits and long-term growth that inevitably come to well-established companies operating in relatively free and stable economies.
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- Persistent curiosity: Investment professionals know more about investing than you do, because they devote their lives to it. But you can acquire more knowledge than most investors simply by reading widely and asking plenty of questions. It’s always a good idea to read books and visit investing web sites. It pays to read as widely as possible, especially when you’re just starting out and need good advice. Most local libraries have a substantial shelf of investment books. Browse that shelf and borrow an investment book on each visit. You’ll also find a wide range of Canadian and international investing information online. You could learn a great deal on our web site, tsinetwork.ca, which has thousands of articles on investing advice, portfolio strategies and individual investments. Make it fun. Don’t feel obligated to study every web site you visit or finish every book you get your hands on. The knowledge you need appears in many places, but quality and readability vary widely. No need to wade through heavy volumes crammed with statistical analysis. You might as well absorb investment advice from sources that are pleasant to read.
- A realistic sense of optimism: To succeed as an investor, put matters in perspective. Despite wars, recessions and market setbacks, stock prices generally reach successively higher levels over long periods. You can’t foresee the next downturn. But you can buy high-quality investments gradually during your working years, sell them gradually in retirement, and reinvest your dividends along the way. Follow that advice and you will automatically buy more shares when prices are low, and fewer when they are high.
COMMENTS PLEASE—Share your investment experience and opinions with fellow TSINetwork.ca members What is the best habit you feel you have developed in your investing career? Is there one habit that you feel you need to change to become a better investor? Let us know what you think.
