Want to know if you will actually become a great investor? Here are five common characteristics that great investors tend to share. Great investors are patient Investing in shares takes time. It is definitely not a “get-rich-quick” kind of thing. If you are unwilling to wait at least five years for your investment to pan out, maybe investing in shares is not for you. It took alcoholic and non-alcoholic beverage maker Thai Beverage Public Company Limited (SGX: Y92) more than eight years to appreciate from S$0.27 per share at the close of its first day of trading in May 2006…
Want to know if you will actually become a great investor? Here are five common characteristics that great investors tend to share.
Great investors are patient
Investing in shares takes time. It is definitely not a “get-rich-quick” kind of thing. If you are unwilling to wait at least five years for your investment to pan out, maybe investing in shares is not for you.
It took alcoholic and non-alcoholic beverage maker Thai Beverage Public Company Limited (SGX: Y92) more than eight years to appreciate from S$0.27 per share at the close of its first day of trading in May 2006 to its current price of S$0.700. And even then, its gains really only started to come from 2012 onwards as seen in the chart below (click for a larger view).
Source: Google Finance
You must be able to continue holding on to your shares of a growing business (this is very important!) even when its share price is not moving in order to fully appreciate the value of long term investing (from 2006 to 2011, Thai Beverage’s revenue had grown by a total of 35%).
Great investors are pragmatic
Investing is about making your money work for you. There should not be any emotions involved when investing. If there’s some sort of emotional attachment to the shares you own, it might cloud your judgment and damage your results in the long run. Being logical and pragmatic about your investments might be the best weapon for you in the game of investing.
Great investors are disciplined
Investing is not so much about trying to find winners in the market all the time. It is more about having a systematic approach to investing and following your own strategy. This requires discipline.
Warren Buffett famously stayed away from technology stocks during the heydays of the dot-com bubble in the late 1990s even when everyone was criticizing him for it. But to Buffett, it was simply natural for him to avoid tech stocks as he has a system of investing only in companies he understands – and he doesn’t understand tech stocks. He stuck with his principles even when the crowd disagreed with him.
Great investors are humbble
The really good investors know that the market is bigger than any one investor or even investing organisation. We should stay humble in the face of the market because there is always someone smarter than us out there. If we use our ego to guide us in our investing activities, the ending is most likely an unpleasant one.
Great investors are comfortable being an outcast
All great investors are comfortable in their own skin. This means that you have to be confident of your convictions even when the world disagrees with you. This might sound contradictory to the characteristic of having to be humble, but confidence and arrogance are two distinct matters. Confidence comes after careful consideration of all dissenting voices; arrogance sees the dismissal of dissent before any consideration is given.
Being a contrarian is a large part of being a successful investor. As the legendary investor Sir John Templeton once said:
“The time of maximum pessimism is the best time to buy, and the time of maximum optimism is the best time to sell.”
Unfortunately, being a contrarian is a lonely endeavor. If you constantly need approval from others about your performance, then you might suffer greatly as an investor.
Here are just five characteristics that I have observed in many great investors, including investors within our own Foolish community. Feel free to let me know what other traits you believe should be on this list through the comments section below!
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The information provided is for general information purposes only and is not intended to be personalised investment or financial advice. Motley Fool Singapore contributor Stanley Lim doesn’t own shares in any companies mentioned.