3 key habits of smart investors

Everyone wants to make money from investing in the share market but why is it that some people make a lot more than others?

One way to improve your investment returns is by emulating successful investors. Here are three key habits which you might want to adopt.

1. Emotional detachment

It is often said that a key personality trait of smart investors is the ability to minimise their investment emotions and focus on the facts.

This emotional (or psychological) trait sounds simple enough in theory, but it turns out to be very difficult in practice. Keeping a journal of investment decisions has worked for some investors who have tried to improve their investment performance.

2. Let volatility be your friend

While serious bear markets and the bargains they bring only come around every so often, every year there is almost always a great opportunity to buy quality companies at attractive prices.

The most recent example is Brexit.

Over the past month numerous quality stocks were sold off, in some cases arguably to an unjustified extent. For example, CYBG PLC CDI 1:1 (ASX: CYB) which is the UK-based Clydesdale & Yorkshire Bank has fallen 33%. It was recently demerged from the National Australia Bank Ltd (ASX: NAB), but arguably its future outlook as a separately run business remains compelling.

3. Buy and hold for long periods

Many investors who have successfully grown their wealth understand the benefit of owning a growing company for the long term rather than trying to pick the peaks and troughs.

For example, over the past decade there would have been many times when leading biopharma stock CSL Limited (ASX: CSL) looked fully valued or its outlook questionable. However, simply hanging on to this quality company has provided an average total shareholder return of 22.5% per annum over the past 10 years.

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Motley Fool contributor Tim McArthur 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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