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6 Characteristics of Successful Investors – Part II

Investing in the stock market can reap varying returns for different investors. This can range from making losses in the stock market to earning annual returns of 25% and above (think Warren Buffett, Peter Lynch, and Rick Guerin).

So, what makes the successful investors stand out from the rest and how can each of us emulate their success?

In this series of articles, I highlight six characteristics that an investor needs to be successful. In the first article, I looked at patience, emotional control and being an avid learner. In this article, I will emphasise three different characteristics that we need to develop.

Characteristic 4: They are highly disciplined

Imagine an investor who has decided to adopt a long-term game plan for his investments. Unfortunately, there is a market crash that sees the value of his investments cut by more than half. The investor, because of fear, hastily calls his broker and asks to liquidate his shares, fearing that he will lose even more down the road.

This kind of decisions can be extremely damaging to our long-term returns. A disciplined investor should instead assess the situation; look to see if the share price dip is warranted before making any rash decisions. If the share price has declined because of overall market sentiment and has no long-term basis, then holding on to the shares should be the better option.

Discipline is critical in investing. However, it is also easier said than done. Investors need to find ways to ensure that they are disciplined in their investment approach so that they can always make sound strategic decisions.

Characteristic 5: They are self-aware

Successful investors need to have a good grasp of their own capabilities. Warren Buffett once said that he only invests in companies that he understands.

As investors, we should acknowledge our limitations and invest only where we know we have an edge.

Being self-aware also means realising when we have made a mistake. By doing so, we can learn from the mistakes and ensure that we do not make similar ones in the future.

Characteristic 6: They have a passion for investing

Let’s face it, without passion, the “super investors” will never have reached the heights they have achieved.

Extremely wealthy men like Warren Buffett and Charlie Munger need not continue scouring the stock market for investments, but they still do. This is not because they need the money, but because of their love for investing.

Investors who find joy in investing will inevitably be able to beat the average investor who merely does it as a way to earn money.

The Foolish bottom line

Not all investors are made equal. If we are to achieve better returns on our investments, we need to try and emulate the characteristics of these successful investors. Not only do they employ impeccable investment strategies, they also have key characteristics that make them successful.

Meanwhile, for more (free!) investing insights, sign up here for your FREE subscription to The Motley Fool's investing newsletter, Take Stock Singapore. It will teach you how you can grow your wealth in the years ahead.

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The information provided is for general information purposes only and is not intended to be personalised investment or financial advice.