Article by Sherin Dev; Follow me in Twitter / Facebook
Just do a search in Google with the title of this article ‘ How to Become a Successful Investor’. There would be huge number of articles explaining how to become a successful investor. I have gone through some of them. Yes, there is some information, but most of them diverting the subject to other areas where an investor really not required any exposure. I also wonder by not seeing any of the authors of these articles has not mentioned the most required quality of a successful investor. Having common sense is that quality and that should be the very first quality any investor should have to become a successful investor.
Here are some practices and lessons including vital steps to become a successful investor. These steps seems painful to those who want to make fast money in a fort night or within no time, but it would appear as simple and understandable to those who are really willing to become a good investor.
Basics of investing
Being an investor is very simple. All of we required to have little money in hand and access to the nearest broker or mutual fund office. Just head up to those offices and inform them that you required investing money. Rest they will do. But, don’t ask the question, what happens to this money later. You may sometime receive it back if you are lucky or may lose all the money.Understand the only one sure thing in the investment world, 100% lose of invested money. There is no other sure thing than this. This sure thing is highly controllable by individual only, but depends on how the investor is. As mentioned earlier, common sense plays major role all over the investment career of any one. Once forgotten this rule, one would later end up with huge lose.
Know what is investing
Simple words, investing are not a game or gambling. It is only for those who have understood the term in depth along with how to invest perfectly. Investing doesn’t mean making money in the next moment. Investment meant for life time with intended profit time to time. Investments are sometime like driving your car. If not drive carefully, it would either lead you to an accident or to the nearest police station.
Understand the risk and returns
A good investor should be aware about the possible risk and returns from his investments. Example, if you go to participate in a car race, what would be your immediate preparations? You will certainly prepare to save your body and life in case of any accident happens. There are huge possibilities for accidents. But, once win, huge prize money waiting for you. So, you need to prepare to avoid accidents and win the race. Understand the risk and returns in this way. If not able to take risk, your returns would be less. High risk means possible high returns and low risk means possible low returns. Investor should be able to understand the relationship between risk and returns and how it applicable when investing into stocks.
Determine the Goals
Why do you want to invest? Is it just for a time pass or just because you have excess money? Both are not appropriate to a good investor. Instead, have well clear, achievable goals. If you are not able to find any goal that justify your investment intentions, better leave back under to your blanket. Investment is not for those who like to follow the crowd or love advices from Uncle Sam.
Learn from failed investors than super investors…
Very strange yea…. Everyone loves to follow the practices of successful investors. Let them follow but you shouldn’t be the one in it. Instead, read learn from failed investors and understand the reason why they failed. This would help you to avoid similar mistakes when investing money. As a beginner investor, never pick any most successful or legend investors as your role model, but start to learn lessons from failed investors. In the real world, this would help you a lot to avoid biggest mistakes that have frequently happened and trashed multiple investors earlier. Never pick the big, but start from down.
Create your own investment intellectual framework
Intellectual framework is nothing but a set of self created rules for making investments. This can be done or must do by each intelligent investor prior entering to the market. Through reading the investment success and failures, authentic investment guides all would help to create successful frameworks. A perfect framework guide investors through the right path than wrong.
Learn from right sources
To become a successful investor, invest your time first to learn. Proper learning would help investors to analyze things to accept or avoid and build right measure confidence. Able to identify ‘never’ and ‘must do’ would shape you as a good investor. To reach to that position, one should invest considerable time to learn things first. Read biography and autobiography of legend investors like Warren Buffet and authentic writings from Philip Fisher, Benjamin Graham. Never run behind all those available guides that are not authentic. Read here to know what is authentic and un-authentic books are.
Conclusion
There would not be any spoon feed technique available to become a good investor other than one should work self by investing lots of time.
1. Have right knowledge on what it meant by the word ‘investment’. Investors must know the relationship of risks and returns associated to investments.
2. Without specific goal, making investments are baseless and useless..
3. Learn maximum about the happened investment mistakes by various people. This would late help you to avoid such costly mistakes.
4. Create your own investment intellectual framework. It is nothing but your own rules for what to do and what not..
5. Read only Authentic books, authored by great investors like Benjamin Graham and Philip Fisher
Further read: I have listed all the possible, critical investment errors in this blog under the title of ‘How they lost their Rolls Royce in the Wall street’. This would be a good starting point for readers.