There are a few things that most top investors have in common with each other. It is often said that most investors use their money and invest the rest, while a great investor invests their money and uses the rest.
Although many investors have made millions, many others have also lost out by not having or developing the right characteristics. In this article we will explore the top characteristics of top investors and why they are so important. By developing these characteristics, you can learn what it takes to become a top investor and make effective financial decisions.
Knowledge
A top investor has extensive knowledge of the market that he/she is operating in. This can be developed by actively learning through activities such as analyzing growth patterns, researching company investment strategy, and developing a detailed plan for an exit point. The knowledge of how to separate normal market fluctuations from the underlying value of an asset takes a lot of research and experience. Don’t go in blind – with increased knowledge comes an increased chance of making the right decisions on investments!
Goal-Setting
Remember the saying: “failing to plan is planning to fail”. Make sure that you have clear and defined goals and a foolproof plan to achieve them. One sign of a top investor is possessing a detailed plan of action within a set time period, to acquire a defined return on investment. In addition to this, a top investor always makes preparations for uncertainties in the market!
Understanding of Risk
There is always an inherent risk in investing – otherwise, everyone would be doing it and succeeding! Top investors know how to be as risk-averse as possible, however, and achieve this through detailed plans and analysis of expected returns. Studying business concepts such as the Horns Effect, Halo Effect, and The Illusion of Choice is a good place to start. No investment is risk-free, but having extensive knowledge and understanding of market principles allows you to make educated calculations on which risks are worth taking!
Decision-Making
Top Investors keep an eye on market activities and trends, keeping their knowledge up-to-date They update their knowledge about market activities and growth. On top of understanding market trends and financial strategy, it is vital to have a level-headed personality and consider various options before acting. If you make a mistake (which most people will at some point in their career!) it is important to understand why this happened and to learn from it in the future.
Patience
Patience is a virtue, and this applies to investment as much as any other field! Being patient and exploring the options available to you before acting is perhaps the most important characteristic needed to become a successful investor. Impatient investors are more likely to fall for “get-rich-quick” solutions, which may at first seem easy and profitable but are usually unwise investments in the long-term. In the words of Warren Buffet, “you can’t get a baby in one month by getting nine women pregnant”!
Patient investors will be willing to wait out a small drop in profits if it leads to a much greater iproft increase down the road!