Good habits promote success

By Nancy L. Schultz | May 26, 2009

Analysts are constantly trying to find common threads that connect successful people, so it’s not unusual to find ongoing attempts to identify the characteristics of prosperous investors. Several good investing habits seem to be shared among the consistently successful. Here are four of them. In the next edition of Financial Journeys, we’ll explore four more.

Disciplined thinking

A key characteristic among successful investors is the disciplined thought process they have developed. How you achieve this is an individual matter. Some recommend keeping a diary of every investment, with the idea of learning from any mistakes you might make.

Perhaps the most important impact of a disciplined thought process is that it can overcome the emotions so many attach to their investments. It’s been shown time and again that too many investors see their investments through an emotional filter that precludes well-tempered thinking. It’s common to find this among investors who build concentrated positions in their own firms or who become captivated by a particular investment niche.

Risk realities

During bull markets, it’s common to find investors expressing fairly relaxed attitudes when they answer risk tolerance questions. However, such attitudes have been put through a severe test over the past 18 months. But, just as risk may seem less consequential when the markets consistently gain month after month, now that the markets have fallen, it may be tempting to oversell fear of risk.

Commonly, risk tolerance is connected with your investment time frame, so now may be a good time to reassess both. If necessary, reevaluate your overall attitude toward risk. Successful investors know risk is always present, but aren’t paralyzed by it. As in any aspect of life, unexpected things can happen, but historically, successful investors have countered risk with the discipline they have applied when making investment choices.

Opportunities await

Investors who succeed in building wealth keep abreast of market opportunities. They exist, even in what may seem the worst of times. It takes rational thought and judgment to act on sound ideas when so many other investors are consumed by either fear of risk or the generally prevailing investing atmosphere. Those who are considered model investors consistently maintain their success comes from not following the crowd.

Brutal honesty

The most prosperous investors don’t flinch when evaluating their holdings or portfolios. Applying a brutal honesty can overcome a tendency to allow emotional involvement to sway investment decisions.

Needless to say, none of this means giving up. Markets such as we’ve been experiencing can be used as catalysts for inspiring even better investment decisions in the future. It’s a matter of learning the lessons.
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