What Makes a Good Investor?
There are times when it is difficult to be a ‘good investor.’ The dot-com hysteria that played out in the early 2000s was one such time. A decade later, when the market was dominated by fear and global uncertainty, was another time in which it was difficult to maintain ‘good investor’ discipline.
What are the behavioral traits of a good investor?
A good investor takes the time to identify financial objectives, risk tolerance and time horizon factors in order to devise a comprehensive investment plan. This information, along with academically validated principles and diversified asset class weightings, is integrated into a well-designed, thoughtfully engineered long-term portfolio strategy.
A good investor is able to maintain investment discipline in the face of difficult times and worrisome short-term performance returns. The good investor does not allow emotion to override reason as that could prompt reactions that are counter-intuitive to long-term investment success.
A good investor makes investment decisions that are aligned with the methodical, objective and long-term strategic plan designed specifically for the investor’s unique goals and expectations — regardless of any intermittent or unexpected external forces introduced into the market equation.
A good investor understands and accepts that realizing measurable return over time requires investing in the stock market. And that part and parcel with the stock market come volatility and risk. The good investor is also cognizant of the fact that, while stock market performance will wax and wane periodically, its overall historical performance has continued to progress ever upward.
A good investor takes (and is able to take) advantage of the hidden opportunities for portfolio growth uniquely available in a difficult/down/risk-off market.
A good investor reaches established long-term financial goals through a solid understanding of how the market works, the role that calculated risk plays in incremental return, the reasons for maintaining a long-term buy-and-hold investment strategy and the life-long importance of ‘planning the work and then working the plan.’