Wish you and your loved ones a very Happy New Year 2016.
Now, coming to the moot question, how to be a successful investor? Well, I recently came across a very good talk delivered by Mark Sellers to Harvard MBA students and it’s not about how to be a successful investor; it’s rather about the few common traits the successful investors share.
Before reading further, one thing that should make you happy is that you don’t necessarily have to be a CA, CFA, MBA, etc to be a successful investor. Being one of those does give you a head start in analyzing financial statements, but that’s about it. It’s more psychological, behavioural that accounts for success, though much more difficult to attain and follow.
So, who’s a successful investor?
As per Mark Sellers, a successful investor is one who is able to compound capital at 20%-25% over very long duration; not just 2, 3 or 5 years, rather entire career or at least 20 years or so.
To realize the impact of long term compounding and for the sake of information, at 26% annual compounding your capital doubles in 3 years, grows 10 times in 10 years and 100 times in 20 years.
And in order to achieve the above, you have to have the following 7 traits. I have only briefly mentioned the traits below while I would suggest you to read the attached pdf (7 traits of successful investor). It’s a small pdf of 6 pages; I enjoyed it thoroughly and thought of sharing the same with you.
Trait #1 is the ability to buy stocks while others are panicking and sell stocks while others are euphoric.
Trait #2 is the obsession about playing the game and wanting to win.
A third trait is the willingness to learn from past mistakes.
A fourth trait is an inherent sense of risk based on common sense.
Trait #5: Great investors have confidence in their own convictions and stick with them, even when facing criticism
Sixth, it’s important to have both sides of your brain working, not just the left side (the side that’s good at math and organization.)
And finally the most important, and rarest, trait of all: The ability to live through volatility without changing your investment thought process.