3 Habits You Can Learn to be A Successful Investor

If you want to be a successful investor, Peter Lynch has a list of qualities that he thinks is necessary.

Lynch might be someone you want to listen to when it comes to investing matters. He became the head of the U.S.-based Fidelity Magellan fund in 1997 and retired from the post in 1990. During his 13 year tenure, he delivered annualised returns of 29%, turning every $1,000 invested with him in 1977 into $27,200 in 1990.

Here are three essential qualities to have from his list:

1. Willingness to do independent research

The fall in oil prices is a favorite topic amongst investing circles currently. Shares of blue chip companies like rig builders Keppel Corporation Limited (SGX: BN4) and SembCorp Marine Ltd (SGX: S51) have fallen by more than 20% since the start of 2014 and may have caught the eye of bargain hunters.

Some investors would invest because they believe that oil prices will eventually recover. But is that true?

Just because every other investor is interested in oil and gas stocks is not a good enough reason to get invested yourself. You have to be willing to judge the situation for yourself. Ultimately, it’s your money at stake. Therefore, your conviction to hold through the good times and the bad has to be strong.

My Foolish colleague Stanley Lim presented his own take on the potential recovery of the oil and gas sector here. I would encourage you to make your own assessment as well.

2. An equal willingness to admit to mistakes

We should not automatically judge a fall in share price as a mistake, as my fellow Fool David Kuo noted a couple of years ago:

“Regardless of whether the shares rise or fall, what counts is how the underlying business is doing. Another thing that matters is whether the valuation reflects what is going on in the business.”

But, there will be times when despite our best research, the operating conditions in our chosen companies will deteriorate beyond what we had foresaw. Under such circumstances, we have to own up to the mistake and maybe even sell our shares at a loss. Or as David would also add:

“… businesses that are losing ground to competitors, slipping into cash flow problems, losing their competitive edge and generally showing signs of decline are losers. They should be cut.”

Point is, as we make our independent investment choices, we should be ready to judge our own mistakes as well.

3. The ability to make decisions without complete or perfect information

The vague outlook for the oil and gas industry will test our ability to make decisions using incomplete and imperfect data. No one is able to predict with certainty how the oil industry players will react to the oil price decline, and what the time frames will be for their reactions.

As Foolish investors, we can only take what we know, acknowledge what we can’t know, and make our own decisions upon this.

Going back to the example with Keppel Corporation, what we know is that the company has a net order book of $12.5 billion which stretches to 2019. What we don’t know is how long lower oil prices will persist.

We can come to better conclusions when we frame our investing questions this way.

Have a good weekend ahead of you, Foolish readers!

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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 Chin Hui Leong doesn’t own shares in any companies mentioned.