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Have you ever wished to become like your favorite investors like Warren Buffett, Charlie Munger or Peter Lynch? Ever thought what is common among all great and successful investors. What special features these investors possess which you don’t?
The first thing which strikes our mind is that all of them are very good at stock picking and have already made a lot of money in the past. If you analyze them closely, you’ll find a set of qualities which they have in common.
Here’s a list of 10 qualities of great investors-
1. They are passionate about the game of investing
Investing is a long-term game and it requires a good amount of dedication and passion. The general investors often look at how much they are making it now while the successful investors often look at the long-term picture and wait patiently until it reaches their target. In simple words, they use delayed gratification and enjoy the benefits of compounding.
Someone has rightly said-
“If you are going to play a game, choose a game you can play throughout your life time and investing is one of such game”.
Also Read: Long-term investment – You Reap What You Sow
2. They are patient
Patience is a very important characteristic of successful investors. When they plan to invest in a company, they do so not for making quick gains but keeping long-term picture in mind.
Some of their investments don’t perform at all for several years but this is the time you should be patient enough to proceed with your investments if you’re confident with your analysis.
Charlie Munger said-
“The big money is not in the buying and the selling…..but in the waiting”
3. They have a strong emotional control
Sentiments play a key role in the stock market. Markets are mostly driven by two emotional factors- fear and greed. General investors often invest based on these emotions while the big investors often have a good control over their emotion. They don’t get biased based on the views of market pundits or financial advisors.
“To be a successful business owner and investor, you have to be emotionally neutral to winning and losing. Winning and losing are just part of the game.” — Rich Dad
4. They are focused
The focus is a key in any field whether it is financial markets or in personal life. The successful people are the ones who are focused on their investments and often do one investment at a time.
5. They thrive on risk
A risk is present in probably everything in life. Even the most professional investors respect risk as 50:50 chances of success and failure. But however, the professional investors always invest with strong risk management system by hedging their position so that their downside is limited and they can enjoy good upside.
Read Here: How “risky” is risk?
6. They are disciplined
Discipline and patience are the key characteristics for any investors. When we talk about the experience of any investors, it’s about the achievements made, mistakes undergone and trials faced by them. An investor can never be successful if he/she has not gone through any mistake in their life.
7. They know how to use leverage to their advantage
The successful investors often invest people’s money while general investors invest their personal funds. Other people’s fund is not the only source of leverage rather it can be in the form your investing experience and or can be your professional team.
“The most important word in the world of money is cash flow. The second most important word is leverage.” — Rich Dad
Also Read: Business Risk Analysis and Leverage (Part-1)
8. They learn quickly from their mistakes
In the game of risk, mistakes are bound to occur. One cannot be a successful investor without committing mistakes. So whenever we talk about experience, it’s basically the errors committed, lessons learned and achievements made. These investors rather than being discouraged by mistakes they look upon it as an opportunity to learn new things.
9. They are proactive learners
One of the very important characteristics of highly successful investors is that they are proactive learners. They are voracious readers and they spend most of the time studying than the general investors.
They read books, magazines, journals, annual reports and even attend seminars to upgrade their knowledge and also for their personal development.
There’s a very famous quote by Warren Buffett which says-
“The rich invest in time, the poor invest in money.”
10. They understand value
The legendary investors often give more weightage to value than price. The price is often looked upon by the traders. Successful investors compute an intrinsic value which is basically the present value of future free cash flow. This holds for all stocks, bonds, and real estate. Though this is a difficult task for investors to compute intrinsic value it gives a good understanding of the company’s fair value.
Read More: How to calculate the intrinsic value
These are the important characteristics which every successful investor has in common. If you wish to be in this league of investors, all you require is to develop these characteristics. You can definitely become a successful investor for which you have to keep a trust in yourself and you will see yourself improving.