How Do I Become a Successful Investor?

Woman dawing a chart

Lately, I've been frustrated while driving in my car. No, it is not due to road rage; it has to do with the content of my radio station selection. I know what you're thinking; change the station! Yet I remain transfixed, incredulous of what I am hearing.

If you were to listen to these stations, you might encounter entertainers who tell you that "the only way to make money is to day-trade" or that "the easy way to make money is to buy and sell options that let you leverage a lot of stock with very little capital required." They suggest  that you get rid of your "worthless paper money and exchange it for solid gold." Everyone's doing it! or so these programs seem to imply. They act as though if you aren't using these strategies, there is something wrong with you. I would argue that there is definitely something wrong here, but it's not with the listener.

What happened to REAL investing? Why are so many different media sources encouraging people to gamble their hard earned money by using highly speculative strategies? Knowing that you are probably encountering these questionable sources of information, I wanted to share with you a few reminders of how to become an Investor (with a capital "I").

What Do Successful Investors do?

  • They buy something that they believe in, strongly, and which they feel is a good business, has a good product, has good management, and has a good market. The same goes for investors who select a manager or fund to manage their assets. They look for a solid investment philosophy, long term track record, etc.
  • They look to make a long-term commitment to a company or asset/fund manager and share in its growth. They are not "fair weather fans," only hanging around when the team is winning.
  • They don't panic when the company or asset/fund manager suffers a drop in share price. They ask themselves if anything fundamental has changed, and if they feel it has not, they buy more while the share price is low.
  • They do not buy what everyone else is buying. This is a strategy that Warren Buffet has always used.
  • They look for bargains among high quality investments.
  • They try to separate emotion from investment decisions.
  • They acknowledge when they need assistance. I have rarely met a person who has the knowledge, time, and ability to manage his/her own investments on his/her own. However, I frequently run into people who choose to do this. Part of being a good investor is understanding your limitations.
  • They buy stocks or funds that they understand or they hire a trusted financial adviser who understands the investments. Watch the video below for tips on hiring a financial advisor.

A true Investor is NOT:

  • A gambler who views the stock market as a casino.
  • A high-frequency trader.
  • A person looking to "get rich quick".
  • A person who buys and sells on rumors.
  • A person who thinks that the more complicated an investment strategy is, the better it must be.
  • An amateur who thinks he/she has the knowledge of an expert.

We should all aspire to be true Investors vs. seeking ways to "get rich fast". With so much muck being broadcast as pure gold, it is always helpful to get a reality check of what it means to be the real thing.

Have you tried investing yourself? Or do you feel more comfortable with a financial advisor?