Although there is no foolproof formula for investing success or failure there are traits that those who do well over the long term possess.
As a financial planner with 25 years of experience, I have seen many investors succeed and others struggle. Through my experience, I have identified three primary characteristics or habits of a good investor and three characteristics or habits of poor investors.
- Patience: A good investor understands that investing is a long-term game. They are patient and do not make impulsive decisions based on short-term market movements. They stick to their investment plan and do not get swayed by emotions such as fear or greed.
- Diversification: A good investor understands the importance of diversification. They do not put all their eggs in one basket and spread their investments across different asset classes such as stocks, bonds, and real estate. This helps reduce risk and provides a more balanced portfolio.
- Discipline: A good investor has discipline and sticks to their investment plan. They do not deviate from their plan, even when the market is volatile. They have a long-term perspective and understand that short-term fluctuations are part of investing.
- Emotional: Poor investors tend to make emotional decisions. They get swayed by market movements and let fear or greed dictate their actions. They tend to buy high and sell low, which is the opposite of what a good investor does.
- Lack of Knowledge: Poor investors tend to invest in things they do not understand. They follow trends or invest in the latest fad without doing proper research. They do not have a clear understanding of their investments, which makes it difficult for them to make informed decisions.
- Lack of Patience: Poor investors lack patience and want to see immediate results. They tend to invest in get-rich-quick schemes or high-risk investments without understanding the potential downside. They are not willing to wait for the long-term and want to see results immediately.
In summary, a good investor has patience, diversification, and discipline. They understand that investing is a long-term game and do not make impulsive decisions based on short-term market movements. They also have a clear understanding of their investments and spread their investments across different asset classes.
On the other hand, a poor investor tends to make emotional decisions, lacks knowledge, and lacks patience. They invest in things they do not understand, follow trends or invest in the latest fad without doing proper research, and lack the discipline to stick to their investment plan.
If you want to become a good investor, it is essential to develop these characteristics and habits. Working with a financial planner can help you develop a solid investment plan and stick to it over the long-term. Remember, investing is a long-term game, and success comes from patience, discipline, and a clear understanding of your investments.
Dave Conley, CFP
Dissecting Recent Bank Failures
The research team at LPL Financial conducted quantitative analysis of the 241 publicly-traded banks and savings and loan institutions in the Russell 3000 Index. They analyzed each company’s deposits, deposit rate of growth, unrealized losses, total assets, marketable securities position, capital ratios, and marketable security positions relative to various balance sheet variables. The link below will take you to an article detailing their findings and why what happened at SVB Financial Group (SIVB) and Signature Bank were unique and not likely a sign of a weak banking system.