It is not enough for investors to just analyze stocks well. There are certain key traits that investors need to have to be successful in stock markets. All good investors such as Peter Lynch, Warren Buffett, Mohnish Pabrai, etc have certain key traits which have made them successful. Let’s look at some of these traits.
Investing Should be More Like Watching Paint Dry Or Watching Grass Grow – Paul Samuelson
The ability to hold stocks for at least 3-5 years is important for investors. A decline in stock prices for short periods is fairly common and is inevitable. It is important to ignore the short-term volatility in stock prices and the long-term picture. Even if you find the right stock to invest in that has the potential to give good returns, but lack patience, you won’t be a successful investor.
2. Passion For Stocks
When it comes to stocks, there are two important things to look at – acquiring knowledge and developing a method that works for you. Acquiring knowledge is possible only if you keep on learning and are passionate to deep dive into the sectors in which you want to invest in. For instance, say you want to invest in the sugar sector – you need to deep dive into understanding the dynamics of the sugar sector, the companies involved, its future prospects, latest policy changes, etc. In addition, you need to develop a method that works for you. Developing that method may take some time.
Investors need to have the discipline to stick to their investment approach over a long period. Being disciplined for a few years and then abandoning the approach that works for you will not give the desired results. In addition, the discipline to stick to your circle of competence is important for an investor. Investors also need a lot of discipline to learn constantly about the various updates about the sectors they follow.
In many cases, the price of the stock that you have bought will immediately fall after you have bought it. Investors need to have the confidence to hold on to their stocks even if the stock pick does not work well in the short run.
In some cases like some unforeseen event like the one that resulted in a crash in 2020, the short-term fall in the stocks that you have invested in could be much deeper. Having confidence in the stocks that you have invested in becomes critical in such times. This confidence enables you to not panic in bear markets.
5. Ability To Peek Into The Future
Stock prices are driven by what will happen in the future with respect to sales growth and other parameters. Hence, investors need to look at what will happen in the future with respect to stocks. Also, the ability to look at the future growth potential of the markets as a whole is an important trait for investors. There are some other traits required to be a good investor. Some of these are calmness, independent thinking, self-motivation, and persistence.
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Very important note: The objective of this blog is to share knowledge and info about multi-bagger ideas/opportunities. Neither is this trading website nor an analyst website nor a Buy/Sell call website. For stock market success, always do your homework, own analysis, and make your own decisions.