In life, we should always try to learn as much as we can.
Success does not come easily, and those who have achieved it serve as good role models for us to emulate.
The same goes for investing.
By observing successful long-term investors such as Warren Buffett, we can glean valuable insights on what made them achieve their phenomenal success.
These traits can then be applied to our investment portfolios so that we can enjoy better overall performance.
Doing so allows you to move ever closer to achieving your investment goals and securing that comfortable retirement.
Here are three attributes that you can learn from investors who have done well over time.
A belief in the power of compounding
Great businesses grow stronger over time as they have the secret sauce that makes them successful.
However, the key ingredient is patience as this growth can take years or even decades.
If you sell your shares in a great business too soon, you will miss out on years of future growth, thereby stunting your investment portfolio.
Successful investors are those who compound their wealth by owning strong businesses over the long-term.
As a business prospers and posts higher profits and cash flow, it also becomes more valuable.
The growth in the business will translate to a higher share price over time as investors recognise the high quality of the company.
As profits rise, there is also a high chance that dividends will increase in tandem.
By reinvesting these dividends into more shares in the same business, investors can enjoy the fruits of compounding as you will be using your dividends to generate even more dividends.
Years later, this combination of capital gains and higher dividends will eventually result in a significantly higher portfolio value.
Standing firm through volatility
The second trait is the ability to be steadfast during market volatility.
One feature of investing is that you will inevitably encounter bouts of extreme optimism and pessimism, resulting in sharp swings in share prices in both directions.
Humans are affected by emotions and normal economic cycles lead to changing sentiment over what a business should be worth.
During downturns such as the current pandemic, businesses may trade at low valuations as prospects are significantly dimmed.
However, if you have invested in a resilient company, you should ignore the share price volatility and focus instead on the quality of the business.
It can be tough at times when share prices move up or down for no apparent reason, but the best method is to tune out the share price and just focus on the company’s quarterly updates or earnings reports.
Ultimately, what matters is that the business continues to grow and generate valuable cash flow.
Willingness to admit mistakes
Finally, successful investors are willing to eat humble pie and admit their mistakes.
By recognising our flaws, we are one step closer to becoming better investors.
It takes a brave investor to stand up and be willing to accept that he had made an error.
Only by admitting your mistakes can you go about ensuring that you avoid making a similar one in future.
And that is how we grow and learn as investors over time.
Those who pointedly refuse to accept their fallibility are doomed to repeat the same mistakes.
One suggestion is to maintain a diary where you document each mistake and what you learnt from it.
This process helps you to crystallise your thoughts and provides you with a clearer idea of why the mistake was made and how to prevent it going forward.
Get Smart: Learn from the best
Investing is a marathon, not a sprint.
Whether you are just starting out investing your first stash of money, or a veteran with years of investing experience, it’s always good to learn lessons from the best.
The three attributes above should stand you in good stead to slowly but surely improve as an investor.
As you become a better investor, you’ll also end up making fewer mistakes and stand a better chance of achieving a desirable investment performance.
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Disclaimer: Royston Yang does not own shares in any of the companies mentioned.