Over the years, I've known lots of successful investors, and some unsuccessful ones.
What sets the two groups apart? It's not necessarily hard work. Some of the most successful investors I know work very little at it. Some unsuccessful ones spend too much time on it.
By investor I mean someone who invests money in the market, not necessarily someone who trades. In fact, I think trading actively leads to failure, not success. And by the way, succeeding as an investor is not necessarily about building a mountain of money. It's about building wealth, on your terms, in a way that's easy for you, to meet your goals.
I've concluded over the years that the difference comes down to some habits of mind: ways to approach the job of investing. There's no doubt that investing is part of our job now. Canadians need the higher returns that come from investing to fund their home, their kids education, help their parents and retire well. See my previous post on Five Steps You Can Take Now To Prepare For Retirement.
Recognize your strengths: The successful people I know put their time to where it serves them best. For most of us, that doesn't mean investing. If you're a writer, write. If you're a manager, manage. If you're a driver, drive. You'll make far more money doing what you do well and outsourcing the investment side to a professional.
Be humble about everything else: The evidence has stacked up for decades that no one can beat the market. Even on a single stock trade, an amateur investor is placing a bet, usually against a professional investor. You're betting that the stock will go up, and the person on the other side is betting it will go down. That's fine if you're the gambling type. But successful people recognize that they can't consistently win that game. Nobody can.
Know who's working for whom: I'm not suggesting that the wealthy people I know back away from managing their money. On the contrary, they're usually tough. They set clear expectations and boundaries, and they expect to pay a fair price for good service. They don't put up with tone-deaf or condescending financial advisors, and they don't sit around swallowing big mutual fund fees.
Delay gratification: It's basic, but true. Of course we'd all like to spend all the dollars flowing in as soon as they hit our accounts. Successful investors understand that they need to make their current selves happy -- but also their future selves.
Open yourself to technology; even be an early adopter. Successful investors pay their future selves first by automating their saving and investing. I see this even among our young clients -- people who are comfortable with technology have a big advantage when it comes to building wealth.
Define your own success: Bruce Sellery and I talked about the importance of knowing yourself as an investor. The most successful investors I know aren't on a mission to save as much as they can. They're on a mission to meet their own goals, which means spending a lot of time in the beginning and defining (and redefining) their goals along the way.
If you adopt all these habits of mind, I can pretty much guarantee you'll succeed as an investor, on your terms, not somebody else's.
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