Personality Traits of Successful Investors

This is a guest post from Alban who is a personal finance writer at Home Loan Finder, a home loan comparison website.

When you were growing up, your parents probably told you that you could be anything you wanted to be. Regardless of the wisdom of this parenting technique, the reality is that there are things to which we are all better suited than others and while most of us can get along in a range of fields and activities, there are certainly those where we can excel beyond the achievements of others as well.

As a result, there are certain personality traits which it takes to be a successful investor and while you don’t have to have all of them, you do need to understand how your personality and your investment style works within the investment sector, and know how to tailor your activities and decisions to play to your strengths, whatever they may be.

Different Types of Investors

At some point in your life you have probably taken a personality test, whether online, as part of a work team building experience or for a job application. Even if you haven’t, you will have noticed through your interactions with others that there are a finite number of different people, and you meet the same sort of people over and over again.

The three basic types of personalities are:

• A pleasant or unpleasant temperament.
• Arousable or unarousable.
• Submissive or dominant.

There are then combinations of these three temperaments which include:

• Exuberant
• Dependent
• Relaxed
• Docile
• Hostile
• Anxious
• Disdainful
• Bored

It is in fact the relaxed and docile personalities which are best suited to be successful investors, where the relaxed person is pleasant, unarousable and dominant and the docile personality is pleasant, unarousable and submissive. As a result, it doesn’t always pay to fulfil the cutthroat, ruthless stereotype of the powerful investment magnate, as those who fall into the unpleasant personality group for example often have a low expectation of the world in general, and don’t expect success from their investments.

Also, the arousable personality is volatile when faced with uncertainty and while this nervousness can lead to a greater range of mental highs and lows, they often don’t give away any physical clues. Therefore, the opposite side of this personality trait is relaxed, reliable, stable and stays cool under pressure, allowing them to make strong, confident decisions – the perfect traits for the investment world.

Regardless of your personality type, it can always be helpful to have another party involved in your investment decisions, to counter the weak points of your personality. Warren Buffett for example uses technical trading systems and this third party involvement can supplement your weaknesses and point out issues before they happen.

To make sure you benefit from this type of symbiotic investment strategy, you first need to know what type of investor you are and whether you are excited about your investments or are too scared of failure to do anything – whether you are in control of your life and decisions, or whether you are waiting for someone to guide you. You can then be in a position to play to your strengths and look for someone to counter your weaknesses.

A Successful Investor’s Personality

You don’t have to have all of these traits to be a successful investor and they don’t need to be your dominant personality indicators, however, being aware of what it takes to be a successful investor will allow you to tap into these traits within yourself, and find a way to play them to your strengths:

• The ability to think on your own. This means you need to be able to assess situations and facts, and make decisions based on your own knowledge and information, rather than being influenced by others.
• You are emotionally stable. To make successful investments you need to make them with your head and not be influenced by your emotions. This means you need to stay logical and rational, even in the face of a perceived disaster, and surrounding chaos.
• Confidence in yourself. If you make a decision you need to be able to back yourself and this confidence should not come from arrogance, but a belief in your research and information. At the same time it is important to remember that you’re not always right.
• You are passionate about investing. While you need to keep your emotions under control, you also need to enjoy what you are doing because this passion will lead you to learn more, develop your skills and devote yourself to success.
• You must think long term. The success of investments often comes over the long term so you need to be able to see the bigger picture and hold your position – sometimes for years. You will need to be patient, rather than taking on a lot of short term risk for short term rewards.
• You are curious. To be a successful investor you will need to keep asking why to find out as much as you can – learn about how the world works, how the markets work and why one company will succeed where another won’t. This keeps you up to date with new information and strategies and what is happening in the markets.
• You have good common sense. The ability to determine what is important and what isn’t when analysing each investment possibility will allow you to determine whether the investment is truly worthwhile, or whether an attempt to blindside you almost tempted you into a poor investment option.
• You are disciplined. Before you start investing you will need to develop you investment strategy, philosophy and plans, and it is important to stick with these beliefs through the good times and the bad. Knowing what you want and how you are going to get it allows you to pay attention to the details, while staying diversified and consistent in your approach, because only then can you determine what works and what doesn’t. This discipline should also extend to new investments, where you are able to save up for new ventures.

While these traits are common to many professions, it is their combination and implementation which can put you on the path to being a successful investor, coupled of course with experience and a little luck.