These Are The Five Most Significant Behavior Patterns of Successful Investors
It’s not about skills and knowledge.
Here are what I consider to be the five most important behaviors of the successful investor. It’s not about the skills and expertise of firms, charting techniques, or insider knowledge into specific companies, but rather I’m talking about the behavior of successful investors.
So how does a successful investor behave?
He makes sound decisions based on meticulous analysis.
The successful investor thinks carefully about what his investment strategy should look like, analyzes all the relevant data on this that he can get, and thus makes a sound investment decision. This is fundamentally important, so that he can stick to his strategy even in turbulent times, and not immediately doubt and change his mind.
It requires a lot of discipline and patience.
A lot of time must be spent on analysis and the data must be viewed rationally and not emotionally. The successful investor is not distracted by loud noise in the market about missing this or that hype.
He has no FOMO (Fear of Missing Out). Instead, he understands that all the hypes are just flashes in the pan that can go out as quickly as they came. It is possible to get lucky with this, but much easier to get unlucky.
Instead, the successful investor understands that he must first have his strategy clearly defined in writing so that he can clearly recognize the really good opportunities when the time comes.
When such an opportunity occurs, e.g. when a certain stock is available at a favorable price, he acts decisively. After all, he has done his homework beforehand and is now sure that he will not do anything stupid.
This is the diametrically opposite behavior that characterizes a lot of newcomers, and that I used to use as well.
Back then, I imagined that a particular stock was a good buy now, and looked for confirmation of my positive bias in the available data (whether fundamental, chart, or news).
A successful investor behaves in exactly the opposite way: he clearly defines his strategy, and waits patiently until the data matches his predefined criteria.
As the famous stock market guru André Kostolany said:
“Never chase a streetcar or a stock. Just be patient: the next one is sure to come.”
He doesn’t let himself get carried away.
Based on his precise analysis, the successful investor knows that his decision to buy was sound. It can’t be that bad. He knows his strategy and knows that he has to stick to it in order to be successful. That, in turn, requires a lot of patience and a thick skin. In turbulent market times, even if the portfolio slips a little into minus, he doesn’t let negative comments on the market unsettle him.
After all, investors with a bad strategy still perform better in the long term than would-be investors with no strategy at all, who react nervously to every new piece of news.
There is power in calm.
Because he knows that his investment decision was very carefully considered.
He understands that he himself is also subject to his own bias.
No one is infallible and no one can analyze all the data in the world.
Therefore, the successful investor is prepared for unforeseen events. He cannot foresee them any more than other market participants. And he is aware that he does not have information that others have earlier than himself.
Nevertheless, he does not behave emotionally but rationally when there are surprises.
In practice, this means that in his strategy, in addition to the clear criteria for buying a stock, he has also defined clear criteria for selling a stock. These are data-based and not any hyped or panicked news.
If these criteria come true, he executes his strategy emotionless and gets out of his investments again. You can’t fall in love with a stock or a crypto project. Emotions have no place in investing.
He is humble and admits his mistakes.
The successful investor admits to himself that he is no more immune to false biases than anyone else.
If the strategy adopted over a longer period of time has not brought the desired results after all, then he recognizes that the strategy was flawed.
That he was wrong and that the strategy needs to be improved.
Because an experienced investor accepts this anyway, he never goes all-in with even the most promising strategy.
He soberly accepts the disappointing result and starts analyzing again in a disciplined manner. Under no circumstances does he fall into angry emotions or FOMO, and commits expensive stupidities. For example, investing twice as much in the faulty strategy or betting on the counter-trend without thinking. Especially not with leverage!
He looks beyond the edge of his nose and learns.
The successful investor puts aside any arrogance, educates himself, and actively researches what other investors are doing.
But he is very selective.
He does not fall for the seductions of any investment guru and follows exactly the same steps. Everyone has his own psychology and the strategy he chooses has to fit him. What works for one person may not work for another, because he does not know all the thoughts that the developer of the strategy has made. Then, in case of doubt, one does not stand the strategy in uncertain times and makes a stupid decision.
However, if he comes across another investor that stands out positively to him several times, and he is attracted to and understands the other strategy, then that might be worth a deeper investigation.
Admitting to yourself that most of the time you are also navigating with one blind eye and overlooking many aspects of investing is perhaps THE most important behavior of all.
That is why the successful investor constantly asks himself:
“How do others do it and what can I learn from them?”
Good luck! 🍀
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