Developing the Mindset of a Successful Investor
The mindset we build steers the path for every success we have in our personal lives. Our behavioral actions will play an integral part in how well our investments perform. Knowing how our daily behavior and habits positively and negatively affect our outcomes is crucial to obtaining any real accomplishments. Having a positively conditioned approach to your investments is the biggest key to mastering your portfolio’s success. It all starts within.
Although not statistically proven, we can agree behavioral decisions hold a greater share of the outcome than the technicalities of our finances. Meaning your financial situation is weighted heavily on whether your decisions are disciplined or irresponsible. Knowing you should be setting aside at least 10% of your take home income for investing, but instead are spending it on another night out is not helping you today, and is certainly hurting your future worth even more.
The message isn’t to solely focus on conditioning a strong-willed mindset. It is still important to take the proper time to educate yourself and build your knowledge base. Investing is a numbers game ultimately and knowing where, how long, and how much to invest comes with understanding the subject.
The most common reason people have for not investing is their budget does not have enough room left to do so. If you are below the poverty level and are working tirelessly to make enough money to survive, then please continue to keep trying. But if you are the person who eats out a few times per week, gets a daily coffee from the nearby market, or frequents the local entertainment hangouts, then you have zero excuse for not investing your money. This is the simplest fix in personal wealth building.
If you want to be financially successful, then change the way you view your money. Setting up an automatic transfer to your investment account every two weeks or monthly is a few clicks away. Establishing a frequent contribution amount to a retirement account is so incredibly valuable for your future. Metaphorically it’s like an exercise; a specific amount is deposited on the same day every month to build the strength of the portfolio’s value over time.
It’s a Business
Every business must abide by a strict blueprint if they want to keep the doors open and continue to grow its value. Well the same goes for your investment portfolio. Stick to the game plan as the assets appreciate in value. Being practical with spending is a strategic method to open up more investable opportunities. View every purchase as buying value.
A successful business will not buy anything that will not put back value into the company. If a company pays for an employee to go to training to enhance their skills, it is expected the employee will return with stronger job skills to generate more business for the company. Now, as the individual investing in themselves (you are a business) you should always increase your capabilities to succeed more. This can be from learning new investment strategies, never interfering with your automatic contributions, or refraining from watching the performance of your portfolio on a daily basis.
Discipline to your principles as an investor holds the highest personal trait needed to endure chaotic markets. There’s going to be times where the economic news clouds your thinking and potentially alters your judgement. The key is to remain calm through these times. Maintain your self-control as aligned to your principles. The real success does not come overnight; rather it will take years to see true results.
Once goals have been set, then ensuring milestones are reached is mainly about sticking to the plan. Veering off course happens when we ignore our principles. Straightforward criteria that must be matched before any moves are made will help to prevent those regrettable decisions. If an investment doesn’t reach your price target, do not buy or sell it. If it screams too risky for its potential reward, then head in the other direction.
Here’s a rule of thumb to instill within you: Never make investment decisions based on the opinion of others.
You began your investment journey with specific guidelines. Now that some analyst on television is sending a “warning” alert about how bad the economy is about to become soon, you question your portfolio. Then make a repulsive decision to sell an asset. Weeks go by and that same asset you sold is soaring in value. You’re watching all that potential gain go unattained. This happens all the time to reactive investors.
Making sudden moves based on outside opinions is the quickest way to ruin your investment positions. No human or machine can accurately predict the exact movements of the market. Therefore, it is wise to steer clear of judgment calls all together. Believe in your research and remain cool, calm, and collective. Some investments may take several months to show the results you envisioned, and some may even take years to grow into fruition. However, at the end of the road the maximum possible gain can be realized.
What Successful Investors Do
Successful investors have a long-term orientation, so daily changes in stock prices or rising consumer expenses do not alter any decisions for their portfolio. They couldn’t care less about what the news outlets think of the economy on a given day or what the new investment idea is from a so-called “expert” soliciting their opinion. Who are you going to blame for a loss on an investment? Will it be the person behind the screen giving an educated guess or your persuaded emotions?
Successful investors aim for a targeted return on investment. Meaning, they have planned for an estimated potential return, rather than make an investment and sit back with hopes for the best. The research gathered allows the investor to develop a reasonable outcome. The game of throwing darts on a board and hoping to hit the bullseye is fool’s gold.
Successful investors are not concerned with the past performance of any investment. What has occurred in the past does not dictate what will happen in the future. If the price of an asset has risen in the recent months, a successful investor does not take the increase into consideration for a potential portfolio addition. Other variables will determine the asset’s value as an investment. Also, if an investment does not go the exact path initially planned, it is forgotten and time to move on with no discouragement maintained.
Investing does not have to be a game of chess. The objective is to maximize your investable income by making smart, concise moves over many years. Confidence and discipline will serve as the core competencies for building the mindset of a successful investor.