Welcome back to our next set of winning investment habits that investors should adopt.
These traits are taken from the best-selling book “The Winning Investment Habits of Warren Buffett and George Soros” by Mark Tier.
You can refer to the previous articles in this series here (Part 1), here (Part 2) and here (Part 3).
13. Follow your system religiously
To become a savvy investor, you need to find an investment style or system that works for you.
When you have a system that has proven results, then you want to stick to your criteria religiously.
Investors who stray from their system display a lack of discipline and patience as they tend to just fire at any target, rather than wait for a very good opportunity to present itself.
Remember also to stay within your circle of competence (i.e. stick to what you understand best) to make optimal investment decisions.
14. Corrects mistakes when they become evident
As humans, no one is infallible.
Wise investors are keenly aware of this and take action to immediately correct mistakes as and when they become clear.
If action is taken swiftly, losses are kept small and manageable.
Inexperienced investors would hesitate to correct their mistakes and instead let the losing position stew for some time.
The main reasons are that they are either indecisive or unsure as to how to react.
The result? They end up suffering significant losses due to their delay in correcting the mistake.
15. Treats mistakes as learning experiences
Mistakes should be treated as learning experiences.
In no way do mistakes imply that one’s character or process is flawed.
It is recommended that you keep a diary that records all your investment mistakes.
Doing so will help you to record your past mistakes so that you can imbibe the lessons that come along with them.
You need to view mistakes as a way to refine your investment process, rather than be bogged down by their emotional pain.
The worst thing that can happen is to adopt a losing mindset and give up investing altogether.
Instead, you should look on the positive side of things and let every mistake strengthen your resolve to become an even better investor in future.
16. Returns increase as experience increases
As your investment experience increases, your overall returns will also follow.
This is what is known as “paying your dues”.
It’s a way of saying that you need to pay “school fees” to the stock market.
Successful investors understand the need to lose some money to refine their techniques and processes.
On the other hand, unsuccessful investors fail to comprehend this point.
They make silly mistakes, fail to learn from them and end up incurring debilitating losses again and again until they are completely wiped out.
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Disclaimer: Royston Yang does not own any of the companies mentioned.