Eight behavioural skills of successful investors you should follow
The Economic Times 20/07/2020
It is not just financial literacy but also behavioural skills that are common to investors who grow their wealth consistently. Here are some habits to emulate.
What it translates to
Sticking to a strategy translates to investing discipline and long-term gains. Whether you have diversified into various assets and rebalance the portfolio periodically, or are focused like Warren Buffett, you are likely to earn higher returns and meet your goals compared with those who don’t have a defined strategy.
What it translates to
Not selling an asset that is a loss-making investment, or investing in spurts in random instruments. Selling stocks or redeeming mutual fund units when the market falls, or buying when the Sensex is bullish. All result in losses.
What it translates to
They are always one step ahead of other investors and seldom repeat their mistakes or lose money due to ignorance. Applying information to their investments gives them perspective and foresight to protect their money.
What it translates to
This means they are prepared for all emergencies and have exit strategies, contingency corpus, adequate health and life insurance, as well as a will. They plan their investments with care so that goals are met and money is not lost on account of a mistake in calculation.
What it translates to
Since their investments are governed by reason and logic, they seldom fall foul of trends or lose money because of a wrong purchase. More importantly, they know the purpose and value of each asset in their portfolio.
What it translates to
Since they are focused on their long-term goals, they are seldom distracted by short-term market noise or volatility. So they don’t take impulsive investing decisions or suffer losses.
What it translates to
They don’t let their money idle in bank and start investing for their goals at the right time. This means they are most likely to achieve their goals. They also never lose money in fines and penalties due to delayed payments of bills or EMIs, or accrue interest due to unpaid credit card bills.
What it translates to
Lesser wasteful expenditure means more savings and higher investments. Since a frugal person is keen on saving money, he invests carefully so as to optimise his returns and minimise losses.
- They have an investment strategy
What it translates to
Sticking to a strategy translates to investing discipline and long-term gains. Whether you have diversified into various assets and rebalance the portfolio periodically, or are focused like Warren Buffett, you are likely to earn higher returns and meet your goals compared with those who don’t have a defined strategy.
- Emotional discipline
What it translates to
Not selling an asset that is a loss-making investment, or investing in spurts in random instruments. Selling stocks or redeeming mutual fund units when the market falls, or buying when the Sensex is bullish. All result in losses.
- They don’t stop learning
What it translates to
They are always one step ahead of other investors and seldom repeat their mistakes or lose money due to ignorance. Applying information to their investments gives them perspective and foresight to protect their money.
- They protect their wealth
What it translates to
This means they are prepared for all emergencies and have exit strategies, contingency corpus, adequate health and life insurance, as well as a will. They plan their investments with care so that goals are met and money is not lost on account of a mistake in calculation.
- Don’t follow the herd
What it translates to
Since their investments are governed by reason and logic, they seldom fall foul of trends or lose money because of a wrong purchase. More importantly, they know the purpose and value of each asset in their portfolio.
- They think long term
What it translates to
Since they are focused on their long-term goals, they are seldom distracted by short-term market noise or volatility. So they don’t take impulsive investing decisions or suffer losses.
- They do not have inertia
What it translates to
They don’t let their money idle in bank and start investing for their goals at the right time. This means they are most likely to achieve their goals. They also never lose money in fines and penalties due to delayed payments of bills or EMIs, or accrue interest due to unpaid credit card bills.
- They are frugal
What it translates to
Lesser wasteful expenditure means more savings and higher investments. Since a frugal person is keen on saving money, he invests carefully so as to optimise his returns and minimise losses.