What is the right mindset of an investor?

Without the right mindset it would be difficult to become a successful investor. Lets not limit the mindset questions only with investors. It applies to all successful and professional people in general.

The right mindset is directly connected with following subjects:

  • emotions
  • the ability to build and follow the strategy
  • to make the decisions
  • to handle the problematic situations
  • the ability to learn and adabt
  • etc

All human beings have emotions. Emotions are related with the personality and is very individual thing. So developing the right mindset is usually the hard work with yourself and is so-called self-development.

So while mathematics, banking, physics, portfolio management and all other subjects can be obtained quite easily, the handling of emotions can be mastered by starting learning the human nature and the characteristics of the personalities.

Still, the right mindset is not so difficult to execute. Usually the beginner investors just do not understand the concept of right mindset and what it embodies.

So here is the basic list.

10 most important traits of successful investor:

  1. The most primary goal of investor with the right mindset is to to preserve capital and prevent loss in a portfolio;
  2. The investor should have the exact investment principles with fully developed investment philosophy: Mr. Howard Marks calls it second-level thinking. Second level thinking needs to begin with questioning conventional wisdom and your own assumptions. First level thinkers like shiny objects, and as a result the underlying asset has risen and likely becomes overvalued.
  3. Being greedy when every one else is afraid & be afraid when every one else is Greedy (Warren Buffett)
  4. Understanding that all trasactions can not be 100% successful – the losses should be taken as education expenses.
  5. Successful investors are willing to make short-term sacrifices for long-term result. Ability to stick to the principles during the bad and good times without emotionally selling or buying the stocks.
  6. Understanding that price and value are different things. And acting act as if the stock market doesn’t exist.
  7. Understanding the nature of risk and the concept of Margin of safety.
  8. Also understanding the theory of normality and averages and how it is related with forecasting.
  9. The ability to stay in cash and to wait until the greed turns to fear and then making the investments by picking the best bargains.
  10. … and whatever is happening, DON’T EVER PANIC!!!

By A.R.
Article was first published in Quora.com