The 3 Peculiar Traits of Successful Investors

Look out, fellow investor!

The S&P/ASX 200  (ASX: XJO) shot higher again on Wednesday.

Investors who sold out during the market turmoil earlier in the year must be kicking themselves now…

After all, the market has risen in each of its last five sessions.

It even hit its highest level so far in 2016, busting through 5,400 points!

But despite its recent strength, there are some investors who still aren’t convinced that it’s time to invest in shares…

Maybe they wonder if they’re too late, or if they’ve missed out on the big gains…

Or if a fall in commodity prices will pull the market back down again…

Or if house prices are due for a fall…

In truth, no one can know the answer to any one of those questions with complete certainty.

But while some investors are choosing to let those uncertainties dictate their every move, others are viewing them as pathways to opportunity

The Three Peculiar Traits of Successful Investors

There are many reasons why people choose to invest.

Some do so with the aim of saving for a family holiday. Others hope to pay for their children’s tuition…

Most want to become financially independent so as to not rely on anyone else for their welfare, while some simply dream of an early retirement.

Whatever the reason, there is one underlying goal shared by every investor…

At the end of the day, we invest to grow our wealth. We do it to improve our quality of life, and to save for an even better future.

While that may be the common goal however, many investors fall short of that target.


Well, the answers to that question can vary as well…

One of the most common reasons is that some individuals spend more than they can afford to.

They live beyond their means, spending what they generate in income and then some.

As their income grows, so too do their expenditures…

This is one of the major factors that separates successful and wealthy individuals from the crowd, according to Morgan Housel.

Morgan is a behavioural and finance expert, as well as a columnist for The Motley Fool.

Successful investors recognise that, to get ahead in finance, they need to understand their limits and live below their means.

As their income and wealth grows, their material aspirations grow at a much slower pace, allowing them to accrue more and more over time.

One way to do this is to pay down debt rather than take more on. Or to contribute more money to your brokerage account rather than buying a more expensive bottle of wine…

Budgeting and planning can go a long way towards improving your wealth, but unfortunately, many individuals skip this crucial step.

Thankfully, there are also many individuals who are eager to learn how to improve their wealth.

And if you’ve read this far, I’m assuming you fit into that group…

History has proven that investing in shares has been one of the greatest ways to build wealth in the long-run.

The problem is, the share market doesn’t go up in a straight line, and that can tend to freak investors out!

Consider the performance of the S&P/ASX 200  (ASX: XJO) over the last year…

Despite its recent run, the main bourse is still sitting almost 5% lower than it was 12 months ago.

Some of the country’s biggest and most widely-held shares have fared even worse…

Australia and New Zealand Banking Group (ASX: ANZ) and Woolworths Limited  (ASX: WOW), for instance, are down 24% and 17%.

Meanwhile, BHP Billiton Limited  (ASX: BHP) shares have lost nearly 41%!

Talk about volatility…

They’re afraid too, but they’re not overwhelmed by it

Getting back to why some investors succeed at investing and others fail…

Investing can be like an emotional rollercoaster. When shares are rising, it’s easy to feel like a genius, but when they’re falling, it can be downright scary.

The second trait shared by wealthy people, as highlighted by Morgan, is that successful investors are “just a little bit sociopath” (in a good way)…

Sociopaths are typically unable to get really emotional in situations that most people do.

Of course, most investors will feel some form of emotion, but it’s what they do with it that counts.

As Laurence Gonzales highlighted in his book Deep Survival (my emphasis)…

It’s not a lack of fear that separates elite performers from the rest of us. They’re afraid, too, but they’re not overwhelmed by it.

It just means they can control those emotions, and stay calm when others around them panic.

Part of their knack to do this stems from their ability to care about time periods that most people cannot comprehend. And that, according to Morgan, is the third peculiar trait of successful investors…

Going the Distance

Many investors are concerned about what happens to their shares in the short-run.

They care about what happens over the next 12 months, or 6 months, or sometimes even just a few short weeks!

I said it before: share markets do not go up in straight lines. And investors who take a short-term view risk being bitterly disappointed with their results.

Morgan notes that successful investors detach themselves from that rat race.

Rather than constantly trying to guess the market’s next move, these investors look instead at the next 10 years, or 20 years, or maybe even longer.

They don’t let the market’s day-to-day gyrations bother them, nor do they let them dictate their investment decisions.

It can be tough, for sure, but mastering your emotions and setting yourself a long time-frame for success could really enhance your overall returns.

Of course, doing that is one thing, but finding the right shares to get you there is something completely different.

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Motley Fool contributor Ryan Newman has no position in any stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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