5 Habits of a Successful Investor

Successful investors have not all been born into wealth. Many have developed into successful investors by implementing effective habits in their lives. Many high net worth individuals did not become wealthy overnight.  They have been planning their financial future and strategizing ways to achieve their financial goals.

So, the question is, what are the successfully habits of a successful investor? Here are the tip 5 habits which successful investors use to achieve financial success.

1.They have a diversification strategy

Diversification is a way for investors to control risk. Having a diversified portfolio will help the investor through periods of volatility as risk is lowered. Stocks in different sectors react differently to each other. This means that if a stock plummets because of an event, other stocks may react differently. Therefore in a diversified portfolio, not all stocks will fall simultaneously. We have written about diversification previously in an article titled “The Benefits of Diversification” . One of the findings was that more than 20 stocks could be a negative by diversifying a share portfolio.

2.They begin saving early and save regularly

The majority of high net worth individuals did not inherit their money but saved and invested wisely. Successful investors have made a habit of saving regularly. They then use these savings to invest. Successful investors are not emotionally involved when making investment decisions as they have enough savings to invest. If you need the money in which you are investing, then you more likely to make emotional decisions. It comes back to the old adage, “never invest money you can not afford to lose”.

3.They do not live beyond their means

To save, successful investors do not live beyond their means. They put extra funds they have into investing and make this a habit. These investors understand they need to delay immediate gratification for future wealth. They do not rack up debt on a lifestyle they cannot afford.

4.Look at the long term

Successful investors understand that the share market goes up and down and do not make irrational decisions. They are patient with the market and do not panic and immediately sell when the market falls. Despite the volatility, successful investors have a long-term plan and ride out the price fluctuations.

5.Create a plan

Successful investors have a goal, they have a time frame as to when they want to reach their goals and they allocate how much they need to save each month. When investors have a plan they can think of what strategy they want to undertake to achieve these goals and how much risk they can take on.

Lauren Hua is a private client adviser at Fairmont Equities.

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