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.
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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.
Trait #3 is the willingness to learn from past mistakes.
Trait #4 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
Trait #6 is important to have both sides of your brain working, not just the left side (the side that’s good at math and organization.)
Trait #7 And finally the most important, and rarest, trait of all: The ability to live through volatility without changing your investment thought process.
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