Feb 27, 2024

Financial planning

Common traits of successful investors and why you don't need to be one

traits of successful investors
traits of successful investors

Have you ever wondered what makes a great investor? Could it be their financial education, natural talents, or just plain luck? 

 

Here’s the good news: people can start investing like experts at almost any age thanks to direct indexing. Let’s take a look at some of the most common traits successful investors share and why you don't necessarily need to have them all. Chances are you’re already well on your way to becoming a successful investor.

 

Strengths of successful investors


 Here are eight strengths and attributes of successful investors.


1) Discipline

 

Discipline in investing can come in small actions: consistently moving money into savings accounts, consistently depositing into investments, or not acting / selling because of a dip in the market. 


Discipline isn’t always easy. It can be tempting to double down on a stock when your friend gets excited about it, instead of sticking to the strategy you set at the beginning of the year. Investors who trade regularly without a clear reason for buying / selling often allow their emotions like fear or greed to take over. When that happens, trading starts to look a lot more like ‘gambling’ instead of ‘investing’.


A disciplined investor is focused on reasons. Reasons for buying or reasons for selling. But there’s a hack. While investment apps have encouraged stock picking, you can hack your discipline by doing the ‘boring’ (and potentially more profitable) path of just continuing to put money into a diversified portfolio. 


It might be less exciting than trading every day, but in many circumstances it has been shown to lead to higher returns over time. 


2) Love of reading and learning

 

Many successful investors are frequent and curious readers. Reading a great deal not only helps investors stay on top of the latest economic and industry news, but it also helps foster a love of learning. Frequent reading is also a helpful way for investors to absorb a wide range of material that can be used to identify positive long-term trends.


For example, one of the reasons Warren Buffett is such a successful investor is his regular habit of spending 80% of his day reading. Although he suggests a daily consumption of 500 pages—rather ambitious for most folks—learning something new every day can have a compounding impact on your investment and overall knowledge.


If you’d love to learn more, but find it’s hard to find the time: we love apps like Blinkist and Headway that can give quick summaries on books that cover anything from history, business advice, nutrition, and more.

 

3) Having Patience

 

You know that saying patience is a virtue? Well, it’s also a great quality amongst successful investors. It can take long periods of time to make profits on an investment. This is especially true for value investors who focus on buying undervalued securities that take time to become profitable. So, you can see why long-term focused investors use patience to help see their investment strategy all the way through.


If you’re looking for ways to hack your patience (and we’ve all been there - it’s not easy), try to cut down on the number of times you look at your investment accounts and actively buy or sell. 


Successful investors understand that markets can go down over short time frames, but over long time frames, the markets typically recover and grow. Sometimes, those recoveries take months or even years. 


The longer you stay invested in the S&P 500, the greater your probability of making a positive return. 


Source: Charlie Biello, Creative Planning 


4) Maintaining a sense of calm

 

When your money’s on the line it can be hard to keep your cool. Money is so tightly woven into everybody’s feeling of security and safety, so sudden drops threaten that. Rapid jumps up can feel like a lottery ticket with the same kind of dopamine hits. 


Take a look at the chart below by Edward Jones which illustrates the impact of emotional investing on everyday investors. Strong emotions are a normal part of being human, but before you act on it, try taking 3 deep breaths or going for a walk.


Better yet, talk to your partner and explain what you’re feeling and want to do. Studies show that couples who make investment decisions together, are less likely to make mistakes they regret and less likely to make “impulsive” decisions.


And if you want a simpler path forward, skip the stock picking (at least for the majority of your investments) and get a diversified portfolio managed for you.



5) Detail oriented

 

Buying the wrong stock or hitting ‘buy’ instead of “sell’ by mistake may sound silly but you’d be surprised how regularly this happens. 


Nobody wants to deal with the added stress, costs, and complications of mistakes. Many successful investors also have a good habit of staying organized. They keep accurate records especially  when tax time comes around.


Seasoned investors also recognize the benefits of research and making calculated decisions. This means they tend to be more proactive versus reactive.


6) Plan for different scenarios

 

Instead of only focusing on what could go right, successful investors regularly ask themselves what could go wrong. Since it’s unlikely to make money on every investment, experienced investors try to anticipate multiple outcomes.


Successful investors plan for different scenarios: Blue Sky, Realistic, And Worst Case. This way, the investor is rarely ever surprised by what unfolds. 

  

7) Understanding the Purpose of Investing


In a world filled with exaggerations and sensationalism from mass media to social platforms, information often gets distorted and overhyped. However, seasoned investors are accustomed to this and recognize the importance of distinguishing genuine trends from mere publicity stunts.


A successful investor keeps their "north star" in mind – the reasons behind their investment decisions. These motivations may range from saving for a house down payment, purchasing a reliable car, celebrating a 10-year wedding anniversary, to providing for their children.


As long as an investor has a clear understanding of why they are investing, they are better equipped to stay on course and commit to long-term investing. 


8) Successful investors tend to embrace passive index investing or direct indexing


Successful investors often embrace passive index investing or direct indexing. They understand that attempting to outperform the markets as an active investor is frequently futile. Over a 10-year period, the majority of active fund managers fail to surpass their respective index benchmarks, such as the S&P 500.


Given the challenges faced by professional fund managers in outperforming benchmarks, individual investors are unlikely to fare any better. Therefore, successful investors often allocate most of their capital to a low-cost index fund or ETF as a prudent choice.


Furthermore, consider direct indexing through platforms like Plenty. With direct indexing, you can customize your portfolio to replicate a specific index, exclude investments conflicting with your values, and leverage tax-loss harvesting to potentially boost your portfolio's annual return.



 


Embrace the importance of investing for your future

 

See? That wasn’t so hard. It doesn’t take rocket science to become a successful investor, especially now that technology has made it so easy to invest in a low-cost, diversified way according to your goals and values. 

 

These are all traits you can acquire and some you probably already have. To get a jump on reading more each day, check out our article on Investing 101: A beginner’s guide to building wealth.


You’re well on your way to making better investment decisions.


Go farther with Plenty


Here are Plenty, we make investing simple with direct indexing. We start by asking a few questions about your risk and then recommend a portfolio. You confirm it, sit back, and let us do the investing for you.


Ready to get started? Start your free trial today.


– Team Plenty

 

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This information is for general informational purposes only. It is not intended to constitute investment advice or any other kind of professional advice and should not be relied upon as such. Before taking action based on any such information, we encourage you to consult with the appropriate professionals. We do not endorse any third parties referenced within the article. Market and economic views are subject to change without notice and may be untimely when presented here. Do not infer or assume that any securities, sectors or markets described in this article were or will be profitable. Past performance is no guarantee of future results. There is a possibility of loss. Historical or hypothetical performance results are presented for illustrative purposes only.



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Financial planning

Plenty was founded to democratize access to financial products and tools that accelerate wealth building. Plenty Financial and affiliated entities. (“Plenty Financial”) provide a web, mobile, personal financial management and educational platform to consumers; some of these tools are freely accessible to all consumers, others require a fee-based subscription. Advisory services are provided in the form of software-first financial planning and investment advisory services for fee-based Subscribers. Plenty Financial RIA, LLC is an SEC-Registered Investment Advisor. All investments made are legally owned by you. Investing is inherently risky and Plenty does not guarantee positive performance. Investments are held in accounts at BNY Mellon | Pershings, the world's largest securities servicing company and are SIPC insured. Investing involves risk, including the possible loss of principal, and there is no assurance that the investment will provide positive performance over any period of time.


Brokerage services are provided by Atomic Brokerage LLC "Atomic Brokerage", member FINRA and SIPC. Clearing and custody services are provided by Brokerage firm BNY Mellon Pershing, member SIPC. Plenty Financial RIA, LLC has a relationship with Atomic Brokerage to manage and execute investments on behalf of customers. Subadvisory services are offered through Atomic Invest LLC ("Atomic Invest"), an SEC-registered investment advisor, member SIPC. Atomic Invest was formerly known as Helium Advisors LLC.


Return data used in the interactive tool are hypothetical performance data which contains inherent limitations and is not a substitute for actual investment returns derived from a live portfolio. There are numerous risk factors related to trading and markets which cannot be fully accounted for when depicting Hypothetical Performance. Consequently, future returns are not guaranteed, and a loss of principal may occur. THIS IS FOR INFORMATIONAL PURPOSES ONLY AND SHOULD NOT BE RELIED UPON AS INVESTMENT ADVICE. This site/application has been prepared by Plenty and is not intended to be (and may not be relied on in any manner as) legal, tax, investment, accounting or other advice or as an offer to sell or a solicitation of an offer to buy any securities of any investment product or any investment advisory service. The information contained in this site/application is superseded by, and is qualified in its entirety by, such offering materials. This site/application may contain proprietary, trade-secret, confidential and commercially sensitive information.


By accessing this site, you signify your agreement with and understanding of the following Terms of Use and Legal Information pertaining to both this site and any material in it. Plenty owns and maintains this site. No act of downloading or otherwise copying from this site will transfer title to any software or material at this site to you. Anything that you transmit to this site becomes the property of Plenty, may be used by Plenty for any lawful purpose, and is further subject to disclosure as deemed appropriate by Plenty, including to any legal or regulatory authority to which Plenty is subject. Plenty reserves all rights with respect to copyright ownership of all material at this site, and will enforce such rights to the full extent of the law.


Plenty was founded to democratize access to financial products and tools that accelerate wealth building. Plenty Financial and affiliated entities. (“Plenty Financial”) provide a web, mobile, personal financial management and educational platform to consumers; some of these tools are freely accessible to all consumers, others require a fee-based subscription. Advisory services are provided in the form of software-first financial planning and investment advisory services for fee-based Subscribers. Plenty Financial RIA, LLC is an SEC-Registered Investment Advisor. All investments made are legally owned by you. Investing is inherently risky and Plenty does not guarantee positive performance. Investments are held in accounts at BNY Mellon | Pershings, the world's largest securities servicing company and are SIPC insured. Investing involves risk, including the possible loss of principal, and there is no assurance that the investment will provide positive performance over any period of time.


Brokerage services are provided by Atomic Brokerage LLC "Atomic Brokerage", member FINRA and SIPC. Clearing and custody services are provided by Brokerage firm BNY Mellon Pershing, member SIPC. Plenty Financial RIA, LLC has a relationship with Atomic Brokerage to manage and execute investments on behalf of customers. Subadvisory services are offered through Atomic Invest LLC ("Atomic Invest"), an SEC-registered investment advisor, member SIPC. Atomic Invest was formerly known as Helium Advisors LLC.


Return data used in the interactive tool are hypothetical performance data which contains inherent limitations and is not a substitute for actual investment returns derived from a live portfolio. There are numerous risk factors related to trading and markets which cannot be fully accounted for when depicting Hypothetical Performance. Consequently, future returns are not guaranteed, and a loss of principal may occur. THIS IS FOR INFORMATIONAL PURPOSES ONLY AND SHOULD NOT BE RELIED UPON AS INVESTMENT ADVICE. This site/application has been prepared by Plenty and is not intended to be (and may not be relied on in any manner as) legal, tax, investment, accounting or other advice or as an offer to sell or a solicitation of an offer to buy any securities of any investment product or any investment advisory service. The information contained in this site/application is superseded by, and is qualified in its entirety by, such offering materials. This site/application may contain proprietary, trade-secret, confidential and commercially sensitive information.


By accessing this site, you signify your agreement with and understanding of the following Terms of Use and Legal Information pertaining to both this site and any material in it. Plenty owns and maintains this site. No act of downloading or otherwise copying from this site will transfer title to any software or material at this site to you. Anything that you transmit to this site becomes the property of Plenty, may be used by Plenty for any lawful purpose, and is further subject to disclosure as deemed appropriate by Plenty, including to any legal or regulatory authority to which Plenty is subject. Plenty reserves all rights with respect to copyright ownership of all material at this site, and will enforce such rights to the full extent of the law.


Plenty was founded to democratize access to financial products and tools that accelerate wealth building. Plenty Financial and affiliated entities. (“Plenty Financial”) provide a web, mobile, personal financial management and educational platform to consumers; some of these tools are freely accessible to all consumers, others require a fee-based subscription. Advisory services are provided in the form of software-first financial planning and investment advisory services for fee-based Subscribers. Plenty Financial RIA, LLC is an SEC-Registered Investment Advisor. All investments made are legally owned by you. Investing is inherently risky and Plenty does not guarantee positive performance. Investments are held in accounts at BNY Mellon | Pershings, the world's largest securities servicing company and are SIPC insured. Investing involves risk, including the possible loss of principal, and there is no assurance that the investment will provide positive performance over any period of time.


Brokerage services are provided by Atomic Brokerage LLC "Atomic Brokerage", member FINRA and SIPC. Clearing and custody services are provided by Brokerage firm BNY Mellon Pershing, member SIPC. Plenty Financial RIA, LLC has a relationship with Atomic Brokerage to manage and execute investments on behalf of customers. Subadvisory services are offered through Atomic Invest LLC ("Atomic Invest"), an SEC-registered investment advisor, member SIPC. Atomic Invest was formerly known as Helium Advisors LLC.


Return data used in the interactive tool are hypothetical performance data which contains inherent limitations and is not a substitute for actual investment returns derived from a live portfolio. There are numerous risk factors related to trading and markets which cannot be fully accounted for when depicting Hypothetical Performance. Consequently, future returns are not guaranteed, and a loss of principal may occur. THIS IS FOR INFORMATIONAL PURPOSES ONLY AND SHOULD NOT BE RELIED UPON AS INVESTMENT ADVICE. This site/application has been prepared by Plenty and is not intended to be (and may not be relied on in any manner as) legal, tax, investment, accounting or other advice or as an offer to sell or a solicitation of an offer to buy any securities of any investment product or any investment advisory service. The information contained in this site/application is superseded by, and is qualified in its entirety by, such offering materials. This site/application may contain proprietary, trade-secret, confidential and commercially sensitive information.


By accessing this site, you signify your agreement with and understanding of the following Terms of Use and Legal Information pertaining to both this site and any material in it. Plenty owns and maintains this site. No act of downloading or otherwise copying from this site will transfer title to any software or material at this site to you. Anything that you transmit to this site becomes the property of Plenty, may be used by Plenty for any lawful purpose, and is further subject to disclosure as deemed appropriate by Plenty, including to any legal or regulatory authority to which Plenty is subject. Plenty reserves all rights with respect to copyright ownership of all material at this site, and will enforce such rights to the full extent of the law.