It’s been a rollercoaster week on the global stock markets after a year of relative stability so I thought this was a good time to reflect on what it means to be a ‘good’ investor.
No matter what you are investing in, I believe the following personality traits will stand you in good stead.
You are investing for the long-haul so you can take the ups and downs of the stock market over a long period of time. Your investments will grow slowly and steadily so you need to remain calm during periods of volatility. You need to be able to keep your emotions in check. Don’t get into the trap of checking your investments every day. I only check mine every 3 months or so to see if I need to re-balance my asset allocation.
You have set life goals for yourself, which has helped define your investment strategy. You should know what you are saving for, what your long-term savings goals are, how much exposure to the stock market you need and how much risk you can tolerate.
You should know why you invested in particular funds and make consistent contributions. You know when to re-balance your investments and when to leave them alone. You are secure in your investing decisions and have tuned out all the exterior market noise. You don't go chasing 'hot-tips' from colleagues or whatever the 'next big thing' is. You understand how your investments work and what you need to do to remain on top of them.
Good investors are not gamblers. You shouldn’t chase big returns, and therefore risk big losses, if you don’t have to. If you are disciplined and methodical you know what your long-term investing plans are and you follow these plans through.
5. POSITIVITY - It helps if you believe in the long-term rise of the stock-market otherwise you will always be second-guessing your investing decisions.
And one last thing that I think makes a difference:
Successful investors enjoy the benefits that come from having a team around them for support - be it a real team or a virtual one.
Members of your investing team could be your financial planner, an investment advisor or a even a coach. This gives you someone to discuss plans and goals with, help you with asset allocation, assess your risk tolerance, provide a balanced second opinion or re-assurance in difficult times, or just a friendly ear to listen to your questions and concerns.
You could also build yourself a virtual team of global investment professionals, finance writers or finances blogs that you trust and respect. You can build your knowledge and hone your investing skills by listening to your virtual team and acting on their advice and recommendations. Having this team also helps you cut out a lot of investing chatter and allows you to just focus on the opinions that matter to you.
My virtual team is invaluable to me and comprises of:
Andrew Hallam: essential reading for all expats - if you don't know who he is then should check out his website - www.andrewhallam.com.
Warren Buffet: no introduction required, but I follow his commentary and annual shareholder letters.
John Authers: A Financial Times journalist, his analysis and insight on the markets is fantastic and I've learnt so much from him over the last decade. In fact, all the staff writers at the FT are exceptional and have steered me over a very long time (I was a fan of the FT at 16!).
Simon Black, Sovereign Man: for an 'alternative' view of the markets I find his daily emails very insightful and sobering. A constant reminder to build your own Plan B.
Who would you put on your team?