The character traits and behavioral habits of the most successful investors are diverse, and there is no guaranteed formula for success. Nonetheless, by looking at the shared characteristics of the most successful investors of the last 100 years, we can learn some valuable lessons.
These are the shared personality traits and behavioral characteristics of the most successful investors of all time.
- Interested and Eager To Learn
To excel you have to do the work, and you won’t do the work unless you are interested in the subject matter. You have to get some kind of enjoyment out of it. You have to be comfortable with reading market analysis, economic data, and company reports.
- Open-Minded
Recognizing that you don’t know everything will help you recognize new opportunities and better ways of thinking. Investors who are set in their ways and rigid in their worldview will quickly be left behind.
- Financial Literacy
You don’t need to be a math whiz. But you have to get comfortable working with numbers, because numbers are the language of investing.
- Numeracy
You have to be able to calculate probabilities. This is an essential part of risk management.
- Rational & Realistic
If you set unrealistic goals or have unrealistic expectations, you only set yourself up for disappointment and discouragement. If your beliefs are irrational, you will not be able to understand how the capital markets work.
- Disciplined
Top investors are process-driven and methodical. They take the time to create a detailed, written plan and then they stick to it. They are thorough in their research and execution.
- Focused
To succeed, you have to find a niche where you can use your natural competitive advantage. If you work in the computer software industry, you have a natural advantage over other investors in that space who don’t understand the nuances of successful business models.
- Humility
You have to have the ability and willingness to recognize and admit mistakes.
- Emotional Durability
The stock market is a rollercoaster, so you have to be able to handle the extreme peaks and valleys.
- Patience:
Sometimes your investment thesis will take a long time to unfold in the market. Impatient investors jump from one thesis to the next, and rarely find satisfaction.
- Skeptical
Scoundrels, pirates, and parasites are everywhere. Don’t be naïve and don’t fall for promises of high reward with low risk schemes.
- Bayesian Thinking
Start with a theory, and update your assumptions as more information comes to light. Be flexible and open-minded.
- Frugal
Always keep an eye on costs, but be willing to pay a premium for valuable expertise or information.
- Team-Oriented
Willing to delegate responsibilities that are beyond your capability or prohibitively time-consuming to others who can handle them more efficiently.
Why Do Investors Fail?
The most common causes of poor investment outcomes include:
- Inadequate planning
- Unrealistic expectations
- Irrational beliefs
- Overconfidence
- Lack of knowledge
- Lack of patience
- Lack of discipline