Successful Investing Habits

People think of the investors as people who find out a lot of ways to get success: sometimes by picking up individual stocks in the share market, sometimes by choosing on to the best of the mutual funds available and few do it in some other ways too.

The art of investment to create wealth and accomplish long-term objectives has been recognized time and again. But not everyone avails full advantage of it. What distinguishes the most prosperous investors from the rest are HABITS.

Well, it is quite appropriately said by someone that there are a lot many ways to do something, and the same philosophy applies among investors as well. When we see the lives of some successful investors, we would always come across some similarities in all of them and that is what we are going to talk about in this article further on.

Contrary to popular belief, successful investing is not about “timing” the market or choosing the “best” funds. In fact, truth be told, the perfect market entry or exit time is quite a utopian concept. And the word “best” is always relative. The best stock for Mr. X may not be the best decision for Mr. Y’s portfolio. So, what is it that some investors do that they become so successful? Is it pure luck or is it that they do something differently.

While each successful investor has his or her own investment strategies, there are some common habits that they all share. 

So, if you too want to ace your investment game, here are the few habits that you need to form.

1. Plan it out:  Successful investors always have a concrete plan for their investments. A well-defined plan forms the very foundation of a successful investment strategy.  They define the quantum of risk they are ready to take by assessing the current situation and they set a time frame for their investment based on their goals. 

2. Think Long term: Investment is a long-term process, many people do invest in the market by trading on a daily basis as per the speculation floating in the market. It is a risky business, and one must understand what exactly are you doing while making any short term investment decision. 

(Not Intending any ideas that you should or shouldn't trade that's your choice but here we will focus only on invest)

Long term investments will repay to you over a number of years. Before making an investment one should define the rate of return one wants and looks for a mutual fund that averages this return over a five or ten years’ time period. One should not panic when they are decided to invest in the long term of the period and they should not make the selling of stocks or mutual funds bought when the price drops or when the market looks bad because of the anticipation and sentiments attached to the market. The market always recovers from these drops, although the time taken for it has been different all the time. On the other hand, if you pull out your money when the stock prices are low, you lose the money that you put in initially. If you leave your investments on their own, then they should pull through over time.

3. Diversification is crucial: In practical terms, diversification is holding investments that will react differently to the same market or economic event. For instance, when the economy is growing, stocks tend to outperform bonds. But when things slow down, bonds often hang on better than stocks. By holding both stocks and bonds, you reduce the chances of your portfolio taking a big hit when markets swing one way or the other.

The most common mistake people do is to concentrate their portfolio to particular assets or to a particular sector. Like if you have all your money in the FDs, you are certainly losing a lot of its potential. Also, if you have parked all your money in equities you have definitely gathered a lot of risk in your portfolio. 

A diverse portfolio will always keep your portfolio running with adequate exposure to risk and returns. Though the pace of growth of your portfolio may vary but a well-diversified portfolio will certainly keep growing. 

Since diversification is such an important topic, I will cover it separately some other time. 

4. Patience is an investor's virtue: Patience is a more important factor than intelligence when it comes to investments. Return on someone’s investment is determined primarily on the basis of their asset allocation and the type of investment made. Those who are wise investors, they know that for wealth accumulation the key is possessing a long-term view and letting your investments grow without touching them often.

A smart investor knows the importance of waiting it out and not losing focus from his/her final goal. A disciplined investor today will be a successful investor tomorrow.

If you keep on shuffling your portfolio holding based on the performance of your portfolio then this clearly implies two things either your way to impenitent to stick with your investments in the voltaic time and second, you have no clear idea of your investment, probably you picked that particular stock or mutual fund just because of the noise around about it. 

5. Infrequent and big bids: This habit particularly has been one of Buffett's ingredients to success. Most of the famous investors do not keep looking at the stocks to invest on a daily basis or even a monthly basis or even a yearly basis. They pick the few selected scripts and keep investing in them whenever there is an open opportunity.

Do not try to get into everything, focus on your vitals few. For example, when you’re at bat, you shouldn’t concern yourself with every pitch, nor should you regret good pitches that you don’t swing at. 

In other words, you don’t have to have an opinion about every stock or other investment opportunity, nor should you feel bad if a stock you didn’t pick goes up dramatically. Even Buffett says that in your lifetime you should swing at only a couple dozen pitches, and he advises doing careful homework so that the few swings you do take are big hits.

To conclude, successful investors transact less, maintains diversity, are patient and follow a plan. These habits will definitely take you on the path of successful investing. 

But do remember that there are no short-cuts to success. You need to give it time.