There’s no one-size-fits-all approach to investing, but there are several common qualities of a good investor—and knowing them can pay big dividends for your own portfolio. Some have made millions. Many have lost just as much. Others play the middle. Everyone has their own style and comfort level with the ins and outs of the market’s delicate balance of risk vs. reward. But the greats tend to share similar traits that helped them achieve success—patience, focus, calm, research, and much more.
One of the hardest things to master about the market is the conflicting advice—invest in this, not that; avoid this, but seek out that. Don’t get discouraged by the mixed messages. Examining the characteristics of some of investments best can help to carve out a clearer path forward.
Whether you’re just starting out or looking for ways to improve your investment game, learning from the best can always help you improve your own strategy. Find out what you need to know about the key qualities of a good investor so you can boost your chances of becoming one of the greats.
What Makes a Great Investor?
1. Have a plan and stick to it
As the saying goes—failing to plan is planning to fail. Good investors don’t play it by ear—they set a financial plan and keep their eyes on their goals. The market is rarely a straight line, so having a destination in mind and a defined period of time in which to achieve it is one of the hallmarks of investing success.
Patience is a core part of being able to bring a plan to fruition. Market volatility is inevitable, but if you let frustration, fear, anger, or regret guide your strategy, mistakes are inevitable. Having a clear outline and objective can help you avoid reactionary impulses. In the investment world, patience equals profits.
2. Know more, do better
Curiosity may have killed the cat, but it’s the key to mastering the market. A lot of novice investors make their bets based on sound bites or partially informed guesses. Experts use their curiosity to fuel a constant quest for market knowledge.
The more knowledge you have about the companies and funds in which you’re investing, the more rock-solid your strategy will become. Studying and analyzing short- and long-term growth patterns from trusted sources can help you see the writing on the wall. When can you expect times of high growth? How can you anticipate plateaus? When is the ideal time to exit your investment?
Actively educating yourself is paramount to success, but it’s not everything. The great investors are also wise enough to know what they don’t know. Don’t be afraid to seek out the advice of experts to ask questions and grow your knowledge base. (Our Money Wise Podcast is a great place to start!)
3. Trust your instincts
It’s important to arm yourself with all the knowledge you can—it’s a strong foundation on which to make your decisions. But the experts know that investing success also depends on intuition. Once you’ve studied market activities and growth trends and you have a sound understanding of company market position and overall trends, the next step is up to you.
Following the herd and jumping into the trends is rarely where success is found. Where, when, and how much to invest—the great investors ultimately do what they feel is right in their gut.
4. Keep calm and invest on
The ability to remain calm and not let your emotions get the best of you is one of the key components to building wealth. The market is never a sure bet, but when a big swing or major world event sends the market into a spin, it’s all too tempting to want to cut and run. But when the sky is falling, when the world is clamoring to dump their shares, investors who can keep their cool also end up creating opportunities.
Great investors are able to remain relaxed and tune out the frenzy to find the undervalued opportunities that others miss amidst the chaos. In fact, these moments can be a great time to lean into value investing, a strategy where investors seek out stocks they think have been undervalued.
5. To risk or not to risk
The greatest investors know more than just the market: they know themselves. Risk is an inherent part of investments, but your personal comfort level with putting your money on the line should influence your entire market approach. Leaning into risk, or averting it, is a quality shaped by years of experience—both successes and failures—that can be a powerful guiding force.
Of course, having a higher level of risk can ultimately yield higher rewards, though this isn’t always the case. To help manage capital losses, many investors use the risk-reward ratio. Many others rely on the experience and expertise of active asset managers, like the team here at Davidson Capital Management. If you’d like to speak with us about our strategy to actively manage your portfolio or take advantage of a portfolio review and analysis which will help you reach your financial goals, give us a call today.
