The 7 Habits of Highly Successful Investors

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Liliana Phillips
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2 The 7 Habits of Highly Successful Investors Over the years I ve got to hear the investment insights, secrets and tips from some of South Africa s best investors. Simply put: They do things differently from the masses. It s what makes them so successful. They approach the market in a certain way, and with a certain manner that most do not. Normally you wouldn t have access to such behind-the-scenes gems like these That s why I ve decided to put together a list of things I ve seen only the best investors do. Things that these investors habitually do, not matter what s going on in the markets or how their portfolios are doing. If you make these habits a part of your investment life, I assure you that you ll quickly find yourself on the path to investment profits sooner than you ever realized. Gary Barford Analyst, The SMART Investor

3 Habit #1: Setting Goals Goal setting is crucial to your investment portfolio. It helps you benchmark, and gives you an idea of where you re going and how to react accordingly. Before you start building your portfolio you need to think about what you want to achieve. This in turn helps you to start planning and how you re going to get there. You need to think about what you want and set some tangible goals around this. Goals give you a benchmark, and without a benchmark you won t know how well your investment journey is going. Here are four goal setting tips you can use to get started: Tip #1: Write them down. You can t hit a goal or target if it doesn t exist So write yours down! Putting your goals on paper makes them real, and when they re staring back at you, you have an obligation to them. Doing this also helps you focus on what you want. Tip #2: Your goals need to be SMART. Just saying you want to make tons of money from the stock market is not a goal. What you want to achieve from your investing needs to be SMART (Specific, Measurable, Achievable, Realistic, Timed). With this in mind a better example would be a target of a R30,000 pre-month passive income from your investment by the time you hit retirement. That s a SMART goal.

4 THE 7 HABITS OF HIGHLY SUCCESSFUL INVESTORS Tip #3: Break your goals down into bite size chunks. Chunks you can manage. Building a substantial and profitable investment portfolio is no mean feat so you re going to need to manage yours step by step. Every month / quarter / year you need to put together a list of what you can do to progress towards your greater goals and stick to the list. Remember: Progress, not perfection! Tip #4: Elephants never forget. And neither should you! Refer back to your goals as often as possible. Don t just stash them away in the back of your cupboard never to be seen again. What s the point in that? Constantly refer to them. Some people carry them around on a piece of paper, others keep a digital note on their phone, whilst some even create vision boards. Do what works for you.

5 Habit #2: Creating A Strategy Putting together your goals will already put you ahead of most investors, but to really take things to the next level you need to have a strategy. Your strategy is the foundation for everything you do to build your investment portfolio, so it s incredibly important to make sure it s a well thought out, well researched strategy that fits your profile! Think about it like this: If your goals are your destination, your strategy is the road towards it. It might seem intimidating at first but time well spent on your strategy will save you hours, mistakes and ultimately a lot of money at the end of the day. When you start work on your strategy I d suggest working backwards from your goals and break it down step by step (Remember those manageable chunks?). At the end of the day this ll make it a lot easier for you to manage and make it seem far less intimidating. One thing to keep in mind that because of this your goals will determine your strategy. Are you purely investing in Top 40 stocks? Would you prefer to have a chunk of your portfolio in ETFs and/or Unit Trusts? Are you simply looking for capital gains? What about preference shares, income stocks and dividends? How about time frame, how long do you plan to hold your investments for? Do you see how easy it is to get lost in the noise That s why once you ve set your goals you need a clearly defined strategy to make them happen.

6 Habit #2: Managing Risk Highly successful investors focus on risk management. This is the stock market remember? If you don t have a proper understanding on how to mitigate your risk when you invest, or employ concrete risk management techniques, your portfolio isn t likely to grow the way you want it to And that s if you even have a portfolio left at all. Not having the right risk management in place means you re just gambling. Successful investors place a huge emphasis on risk and have parameters in place for risk and overall account management. Time frames, risk to reward ratio s, stop loss strategies They all play a part in how you approach your investments and ultimately how you focus on risk. Proper risk management helps successful investors cut losing positions and maximize winners. The first step to consistently growing your portfolio is to not lose money.

7 Habit #4: Odds & Probability Highly successful investors think in terms of odds and probability. They fish where the fish are biting. Would you cast a line where no-one has caught a decent catch in ages? Of course not. And it s the same when it comes to investing. Successful investors put their capital at risk in investments they feel have a high probability of success. They do their homework. They crunch the numbers. They make educated estimates. Do they swing for the fences? Of course they don t. That s a one-way ticket back to the pavilion. They give their investments the chance of outperforming over the long run with the right work being done in the background. Every investment s outcome is dictated by the work you put in before you make the investment. By doing this, the most successful investors focus on putting the odds and probabilities in their favor as much as possible.

8 Habit #5: Ignoring Emotions The best investors I know do not allow the power of emotion to consume them. They understand and accept that losing is a part of winning. In fact, they understand that its inevitable. These successful investors strive to remain focused and objective at all times, and do not allow themselves to get attached to a position or become greedy. They understand that periods of losses can and do occur, and that even in the best of times, profits can be fleeting. But most of all, they understand that the stock market doesn t care how you feel, and that emotions are a dangerous path that more often than not leads to losing positions.

9 Habit #6: Never Stop Learning Successful investors NEVER stop learning! Investment success is not a destination, it s a journey. You can never arrive. You can only transition from one market condition to the next. Markets can and do change over time, and successful investors are constantly looking for ways to improve their skills. They re life-long students of the market, and they take complete responsibility for their ability to learn and grow as an investor. They habitually read books, talk to other traders and stay in touch with the markets in which they invest. Never stop learning and you ll never stop profiting.

10 Habit #7: Get A Life! As much as the market can consume us, the best investors have a life outside of the markets. They realize and understand that investing is simply a means to an end. Even the most successful investors require a break now and then to recharge mentally and emotionally, and spending some time away from their screens allows them to do just that. This keeps them sharp and focused during market hours and may potentially allow them to achieve a higher level of success. Investing for whatever reason is like a job, and like any other job one must distance themselves at times to regain perspective.

11 Bonus Habit: Find A Mentor Whilst this habit isn t mutually exclusive with every successful investor, it can be a massive advantage! A mentor s experience can help you in countless ways. They could help you by knowing how to value stocks better than you do, or have experience in certain sectors you don t, or could just lend a helping hand when it comes to knowledge about the market. These are just some of the things that d normally take a few days, or even weeks & months to attain on your own. A mentor can also help you avoid costly mistakes whilst teaching you at the same time. And that s just some of the many reasons a mentor can help you out - There s a wealth of information at your fingertips that could help you make better investments and make more money!

12 Become A Successful Investor Today While there s no Holy Grail to investing, by constantly adopting the habits of highly successful investors you can greatly increase your odds of success. The most successful investors understand the importance of employing these habits each and every day. Fortunately, numerous studies have shown that adopting habits does not take long. Just three weeks in fact. A small price to pay for your investment success! Start practicing the habits of highly successful investors today, and before long these habits will become ingrained and second nature. Here s to SMART investing. Gary Barford Analyst, The SMART Investor The Money Lab PS: If you re looking for an investment mentor, I ve put together a course you absolutely have to see! In it I show you how to build a R1million portfolio. I reveal ALL the secrets, tricks and techniques you need to build a successful, 7-figure investment portfolio. Click here for more.

13 THE 7 HABITS OF HIGHLY SUCCESSFUL INVESTORS PLEASE NOTE: The Money Lab is a research house and not a registered financial services provider. We provide investment ideas, but do not give personal investment advice. Before investing please seek professional advice from your stockbroker or financial adviser.

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