How do great investors become great? How do they seem to always have the fortune to pick winning investments? What is it that sets them apart from the majority of us? An individual’s natural disposition affects the decisions that they make. It can essentially make all the difference between “winning” and “losing” investments.
It doesn’t just come down to financial analysis and recon. It has a lot more to do with the behavior of the investor themselves. The well-known successful investors tend to share common characteristics that have helped put them in the top ranks. For example, if an investor is easily spooked they may not hold on to investments long enough to reap the rewards.
If you are naturally scared of risk, it is unlikely that a big investment that could pay off substantially would be of interest to you, as it would usually entail higher risk. This characteristic stands in conflict with the idea of investing for massive gains. Qualities that stem from one’s temperament affect how an investor goes about their ventures. An investor that is naturally overrun by their emotions may, more often than not, make irrational decisions instead of calculated advantageous choices.
“The investor’s chief problem – and his worst enemy – is likely to be himself. In the end, how your investments behave is much less important than how you behave.” – Benjamin Graham
Lucky for us the innate qualities that unite great investors are like skills; they can be developed. Let’s take a look at the noteworthy keys that make great investors.
The 6 keys of Winning Temperament
Temperament: the combination of mental, physical, and emotional traits of a person; natural predisposition
1-Passion. Passion stimulates the mind and soul. It is what makes waking up in the morning exciting, effortless, and energizing. It is the complete opposite of that nagging chronic buzzing of annoyance you feel much like something you have no passion for. It is difficult to truly succeed without feeling a drive and interest in such a profession that carries as much risk as it does.
“It’s waiting that helps you as an investor, and a lot of people just can’t stand to wait. If you didn’t get the deferred-gratification gene, you’ve got to work very hard to overcome that.” – Charlie Munger, Vice-Chairman, Berkshire Hathaway
2-Patience. The rewards of investments take time, the markets fluctuate, the competition is always high and everyone wants to hit it big with what is thought to be easy – investing. The best investors do not jump to decisions; they wait it out. They know that time creates earnings.
“Look at market fluctuations as your friend rather than your enemy. Profit from folly rather than participate in it.” – Warren Buffett, Chairman and CEO Berkshire Hathaway
3-Perseverance. Successful investors aren’t easily discouraged. Perseverance keeps you trying no matter what comes your way. It’s not talent but consistent effort that gets people far in life, same goes for investors. They are aware that ups and downs are part of the process, and perseverance is what gets any successful person through to the top. Top investors know firsthand that losing is a part of winning. Pick yourself up after a loss and move on, don’t dwell on it, continue on with your strategy.
“A lot of people with high IQs are terrible investors because they’ve got terrible temperaments. You need to keep raw, irrational emotion under control.” – Charlie Munger
4-Control of Emotions. Emotional control is highly warranted. Rational thinking is where great decisions come into play even if we are all driven by emotions to some extent. If we let emotions be the defining driver of our actions, our rational calculations go out the window and we perhaps act without having thought things through.
The fluctuations of the economy, political situation, the stock market, or whichever domain invested in, become an emotional roll-a-coaster. One minute you’ve made 10 million dollars, the next you’ve lost it all, a day later you are up 2 million and so on and so forth. Or perhaps you’ve invested in real-estate and the market is down so you sell on impulse at a great loss. Perhaps the opposite, the market is up and you buy when the prices are on a steep rise, but in the reality a rational investor it would be wise to hold off on the emotional spurge and buy when prices are low.
Great investors understand that the wave of emotions cannot define the course of actions, they instead use what comes to their advantage. It’s a cycle. What goes down comes back up. If you jump at every bump it’ll most likely be a loss where it could’ve been a gain.
“But investing isn’t about beating others at their game. It’s about controlling yourself at your own game.” – Benjamin Graham
5-Self-discipline. To keep emotions in line first self-awareness is required, and then self-control. You want to be able to identify where your decisions are coming from, and then apply self-control to adjust to rational, well-thought out actions. Unless you are a trader, investments flourish on the long term because time withstands the temporary fluctuations. Ignore the anxiety of everyday updates about your investment, turn off the market channels and go about your life.
Something that is said to help keep emotional snap decisions at bay is disciplining yourself to stick to your defined strategies. Great investors set their plans according to what works for them and they stick to it no matter the feelings, no matter the “trend” or urge to jump to other options.
“An investment in knowledge always pays the best interest.” – Benjamin Franklin
6-Proactive Learning. Another important unifying characteristic of famous investors is proactive learning. All are said to all be avid readers, they take the time to sharpen and expand their knowledge base daily. They continuously learn about different topics, industries and other disciplines. This keeps a person aware of what is going on, industry ups and downs, how to navigate possible investment, advances and self-development and everything else. Educating yourself is the best investment you can make, without it would be no room to expand the mind to see and understand new opportunities.