Characteristics of a successful investor?

Ugodre Obi-Chukwuu

For those who are new to investing, an often recurrent question they want an answer to is “how can I be a successful investor?” It is fairly understandable to ask, considering the fairy tales about those that have turned nothing into billions and billions into nothing.

There really is no one route to becoming a successful investor. In fact, nearly every successful investor you ask will tell you varying secrets to success. However, researches have shown common characteristics among most successful investors around the world. While they may have a different approach to making investing decisions, they all mostly use the same underlying principles. Today, we examine some of these principles

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 Start investing early

Sometimes, I wished I had started investing as early as the age of 18. Though, I knew about stocks at the time, I thought it was for those who were rich. Looking back now, I wish I had known better. If at the age of 25 I had invested N8,000 every month at an interest rate of 10 per cent without withdrawals by the time I get to age 65, I will be worth N50m. In fact, if you save N5m today at an interest rate of 10 per cent per annum without withdrawals, you will be worth about N226m in 40 years. Such is the effect time and compounding interest have on investing. Warren Buffet is said to have made his billions when he turned 60.

 Diversify your portfolio

Portfolio diversification is a model a lot of investors use in building their money. This simply means avoiding putting all your eggs in one basket. You should invest in a portfolio of investments that include bonds, treasury bills, stocks and other fixed income securities. That way you get the twin benefits of a balance and a hedge against risk.

 Seek a cash cow

I have observed one of the most important factors that determine wealth creation and sustenance is having a steady source of cash flow. It is no coincidence, many successful investors utilise investment vehicles such as insurance companies, mutual funds, pension funds to create wealth. The good news is that you do not need to start with such a large vehicle. A constant source of income such as your salary or rental income can be your cash cow.

 Stick to a principle

It is hard to remain focused as an investor; however, that is one of the key pillars of a successful investor. Whether you decide to be a growth investor or a value investor or a hybrid of both, just stick to that and remain consistent. I particularly like being a value investor because I hate to speculate and will rather invest after analysing the fundamentals of the investment.

 Choose the right bird(s)

Birds of the same feather they say flock together. This applies strongly in investing and it is important you select the right partners that can help you to fulfil your investment goal. If you are starting out as a young investor, it is advisable that you surround yourself with friends that share a similar interest with you. This helps to improve your investing knowledge and to broaden your mindset as you bounce around ideas.

 Make information your number one asset

Information is one of the most important tools you need to be a successful investor. With good information, decision making becomes easier. You should try as much as possible to research, read and obtain every available information you can possibly lay your hands on before making that tough investment decision.

 Don’t be afraid to accept failure

People say when you fail, you should try, try and try again but that doesn’t apply to all scenarios. Investing off course is one of such. When you make a mistake that leads you to a bad investment decision, do not be afraid to accept your fate and move on. During the stock market crash of 2009, most people lost money when they actually knew the market was sinking. They held on thinking things would turn out better when they should have sold off and counted their losses.

 Save cost and live modest

You can’t be a successful investor and be running up cost without any form of control. No matter how much you make, containing cost is key to a successful investment life. It takes a lot be conservative but it is worth all the efforts.

 Be analytical

Successful businessmen undertake thorough feasibility studies before taking business decisions. They do this to avoid failures that could result from lack of basic understanding of the business they are into. Investors should also imbibe the same principle. If you have decided to invest in stocks, then you must analyse the financial statements of the company, its trends as well as any information you can get on the stock.

 Always seek a bargain

Warren Buffet is well known for buying quality stocks at a fair price. He goes in when others are afraid to go because he has analysed the company very well and identified possible entry points for acquisition of shares. By seeking a bargain, your potential upside is nearly assured as the market will eventually see what you have seen ages ago and reward you with capital appreciation.