The six traits that will make you a successful investor

Whether you are brand new to investing or a seasoned pro, it’s worth remembering that there are several traits that can help you to become a successful long-term investor.

It is useful to practise good habits to give you as much chance as possible of growing your wealth. Here are some of the key characteristics that are worth contemplating.

In a world where everything is at your fingertips — you can have a McDonald’s Big Mac delivered to your door in 30 minutes or an Amazon parcel delivered the same day as ordering — many of us have lost the knack for being patient.

For much in life this can be beneficial. Seize the day, and all that. But when it comes to finance, it doesn’t cut the mustard.

The idea of doubling your fortune overnight makes for a great story but is rare. Instead, remind yourself why patient investors are typically rewarded. Look at the FTSE 100 over the past 20 years: its upward trend shows that long-term investors have had markets on their side. It’s not an outlier — stock markets worldwide have rewarded patient investors, which is why a “buy and hold” strategy can really work.

Then there’s compounding, which works only if you stand back and let it work its magic. As the years go by you’ll see how it benefits your total returns.

Discipline

This is needed in many areas. First, in terms of sticking to your guns on how you decide to invest — finding a strategy that’s right for you, based on your goals, affordability and risk profile. It can be tempting to snap up shares in the company a friend is getting excited about in the pub, but having the discipline to stick to what you have decided on is probably the smarter route.

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Another key discipline to have is hiding the investment platform app on your phone, where it’s not visible every time you unlock your device. While having access to the app means you can check on your Isas and pensions at any time of the day, it’s not necessarily a good idea to do so. Obsessing over day-to-day movements won’t do you any favours.

Don’t try to outsmart the market

“Time in the market, not timing the market” is the old adage. While some people try to work out the peaks and troughs of shares, selling at what they believe are the highs and adding at what they think are lows, you’ll be very lucky if it works. Add in transaction costs — and taxes, if you’re trading outside an Isa — and you’re probably better off staying put.

Most of us are better off investing regularly by setting up a monthly amount. Automating your investments means you don’t need to try to time them — it removes the temptation of doing so, and the risk of getting it wrong. This way, you buy more shares when prices are low and less when they are more expensive. The theory is that you’ll pay the average price over a fixed time, which can help to smooth out any peaks and troughs.

Control your emotions

While it may be emotion that motivates us to invest — fear of not having enough to retire, or love encouraging us to put money aside for our children — emotions should be set aside when it comes to selecting investments.

Scary headlines can prompt you to make unwise moves and euphoria could encourage you to buy at the wrong time. So filter out short-term noise — the reality is that one of the worst times to sell your stocks is after the market has plunged.

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It can be difficult to take a long-term view when markets are volatile, but it shouldn’t distort your long-term financial planning.

Be prepared for failure too: no one can get it right every time. You might make a wrong call on backing a particular stock, or find that a fund you hold has been in the red for longer than you should have allowed. Don’t be afraid to sell out if the investment case has changed. Though before you pull the plug on a perceived failure, make sure you fully understand why something isn’t performing.

Be brave

It’s human instinct to want to run away from the things that threaten our financial security. So it’s important to be prepared for the fact that stock markets don’t move in a straight line.

The potential volatility of markets is one reason that investment is best suited to those with the intention to stay invested for at least five years.

You can take comfort — but no guarantees — from the Barclays Equity Gilt Study. It examines returns from cash deposits and shares, reflecting the changing composition of the London Stock Exchange since 1899.

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The latest one, published in April, shows that a short-term dabble in the stock market is relatively risky — if you invest for just two years at a time, there’s a 30 per cent chance your investment will do worse than if you had just left your money in cash.

However, over any consecutive five-year period, the probability of shares doing best was 77 per cent. Looking over ten years, it soared to 91 per cent.

Those who are wary of the volatility can buy more cautious multi-asset funds and invest monthly, which dampens the thrills and spills along the way.

Scepticism

These days, a necessary trait is to be acutely aware of those who are willing to lie, cheat and steal their way to your money. There are investment scams operating in all corners of the world.

The problem is that they can be difficult to spot because they’re designed to sound and look like genuine investments.

Alarm bells should ring in the very first instance if you’re contacted about an opportunity you haven’t asked for information on. If someone you don’t know calls or emails you about something you haven’t instigated, it’s probably a scam — hang up or delete the message.

If you do get talking to someone on the phone, alarm bells should also ring if there’s any time pressure applied for you to part with money. And if the returns sound too good to be true, they probably are.

If you’re convinced there’s a real opportunity, still don’t commit. Don’t hand over any card details or personal information. Instead talk about it to someone you trust with finances. There’s nothing wrong with being a sceptic. Your life savings could depend on it.