Cultivating Your Investor Mindset For Stock Market Success

Tips to Help You Ride Out Short-Term Volatility for Long-Term Rewards

When it comes to investing in the stock market the only thing you can depend on is that you can’t depend on anything. The markets can be a rocky road and impossible to predict, but that doesn’t mean that you should shy away from investing. In fact, quite the opposite is true because the markets can do wonders for your wealth-building – especially if you have the right investor mindset.

What’s at the core of a strong investor mindset?

Even if you can generally expect a positive market return over the long haul, every investor will face declines in the short-term – sometimes significant ones. Accepting this truth as an investor – and learning not to react emotionally – is at the core of finding success in a volatile market. Doing so will help you achieve your long-term investing goals.

Do you have that foundational step covered? Now we’ll review three more things you can do to cultivate the right mindset for finding success in the stock market.

Act like a business owner.

As an investor, it may help to reframe how you view yourself in relation to the markets. Instead of seeing yourself as an investor, think of yourself as a business owner. Entrepreneurs don’t spend time fretting over the day-to-day changes in the market value of their business. Instead, they stay focused on building the value of their companies over time. Just like CEOs depend on managers and a board of directors to help them run their companies and make money, that’s how you can think about the money you’re making in the markets. Regardless of how you’re spending your days, there’s an entire market working to create wealth for you with your investments – so let it do its job.


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Bring balance to your portfolio.

Risk is inherent in investing, so one of the most important decisions you’ll make with your investments is determining how much risk you want to take on. How much money can you afford to invest in riskier asset classes, and how much do you want to invest in safer assets, like bonds? It can help to pose this question to yourself: “How much short-term loss can I tolerate in my overall portfolio should there be a market crash?”

Determining how much risk you’re willing to take on isn’t a one-time decision. In fact, you’ll want to revisit your portfolio often to rebalance it as you get closer to retirement to ensure that you’re still on track to achieve your long-term goals. A young investor, for instance, will most likely be able to take on more risk as they have decades in front of them to make up for any losses they may incur. Whereas those who are approaching retirement will want to mitigate risk the closer they get to having to depend on their investments to support their lifestyle.

Whatever you decide, determining the right balance for your portfolio – and realizing that it will evolve over time is fundamental to the long-term perspective necessary to achieve success in the markets.


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Invest in a schedule.

As you’re building out your portfolio, be sure to commit to a regular investing schedule or as we say, “pay yourself first”. Whether you decide to invest in the markets monthly, quarterly, bi-annually, or annually, stay disciplined no matter how the markets are performing in the moment. This can be a difficult mental barrier to overcome if the market is underperforming. However, investing on a schedule will ultimately leave you in a stronger position long-term because it ensures you won’t miss out on the upside after a downturn.

Do you have the proper perspective?

Investing is a journey, and one will last for decades if you’re approaching it with the right investor mindset. That’s why it’s so important to not let short-term trends and background noise impact your decision-making. To find success in the markets, you must stay committed to a long-term perspective that accounts for the entire picture, rather than what’s happening in the here and now. Thinking of yourself as a business owner, managing your risk over time, and investing on a schedule are all steps that can help you cultivate the right investor mindset for success.

At Davidson Capital Management, we offer disciplined and transparent investment management services. Our experienced team provides investing solutions that will give you the confidence you need to plan your future the way you’d like to see it. If you feel you might benefit from a conversation with one of our advisors about your investment strategy, contact us today.