We believe that every successful value investor shares similar traits and characteristics that had played a pivotal role in their successes.
There is a lack of comprehensive studies on the relationship between these traits and success, but common sense and early research have shown promising results.
For instance, psychologists have discovered that the level of conscientiousness leads to an increased performance in the workplace, along with intellect and emotional intelligence. Of course, this is unsurprising. An individual who is hardworking and intelligent is more likely to do better in their role.
This article will highlight 5 important traits that you should work towards in order to pave your way towards having a meaningful and successful investing journey.
Patience is key
Investing is a waiting game. You don’t jump in to invest under the influence of herd psychology. There are times where the market will be screaming in your face to buy or sell but you must always revisit your first principle, know that there’s nothing wrong with inaction.
Successful investing requires a tolerance for delayed gratification. Without patience, you are likely to make impulsive and detrimental mistakes.
Do not confuse this with ego. There is a fine line between being confident and being self-conceited. Having high confidence in your own abilities allow you to be less influenced by the noise in the financial market.
When you know and believe in your approach, there is no reason for you to doubt your actions because the market disagrees in the short run.
This, however, is not to say that you ought to believe that you are always right but to place faith in your hard work and constantly improve on it.
Just because others are doing amazing, it doesn’t mean you should be fully emulating their methods blindly. You have to experiment, figure out what works well for you and be confident in your ability. With value investing, it will be like swimming against a current. You are adopting a contrarian mindset against the masses. Hence, some amount of arrogance would be required to keep you believing in yourself over others. Of course, never ever confuse this with over arrogance.
Think different, think deeper
What truly differentiates value investors from the rest is that we see beyond the surface. As Howard Marks has mentioned in his book The Most Important Thing, we should adopt a second-level thinking and not just make flimsy judgements off superficial observations.
When the market behaves in a certain manner, ask yourself if the reaction is justified or not before putting your faith in the market price.
Remember, the market is not always right.
The most successful investors are fully aware that the market is manic, swinging between extreme optimism and pessimism. The worst traits of the human species are often exposed in the financial market. We covet about greater profits while we hope for the worst for the others.
If you approach investing this way, you will be swept up with the rest instead.
To perform in the financial market, you just require an average IQ. You don’t have to be a Harvard University graduate and understand fancy mathematical formulae, but you need to possess composure under high pressure. This doesn’t come naturally with a bright mind.
While being fully prepared and having a firm understanding of the financial market is a prerequisite, what is also very crucial is your execution.
If, for whatever reason, you crack under the market’s pressure and conform, all your hard work will go down the drain.
Not everyone is blessed with superior emotional intelligence, some are more neurotic than others. This does not mean that you are doomed and should steer clear of the market regardless.
Being aware of these facts will develop your emotional intelligence. Allow common sense and rational thinking to take the wheel as you plan to make your next investment decision. Knowing your weaknesses will allow you to come up with a structure for you to be prepared when the time calls for it.
Know your motivation
This is arguably one of the most important point out of the five.
Most value investors, like Warren Buffett, do not work solely for the money, they are more interested in the game. The returns they generated are viewed as a point tracking system more so than anything else.
Passion drives their career, not money.
Money is important I fool you not, but an over-obsession will backfire. The more you desire, the more unachievable it becomes.
Approach investing with the right and healthy mindset, with discipline, your results will speak for itself.
To summarize, we have shared with you five important traits that a value investor should develop to become successful:
- Necessary arrogance
- Be different and be right
- Emotional intelligence
- A passion for investing