The 7 Simple Habits of Highly Successful Investors

Successful investors didn’t become that way overnight. Success takes a lot of things, including building these essential daily habits.
Last updated Oct 13, 2020 | By Ben Walker
The 7 Simple Habits of Highly Successful Investors

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On the surface, investing might seem to be all about making big plays at the right times. But when you dig deeper into why a successful investor made an amazing decision, it’s typically because they’ve incorporated some basic habits into their daily processes and strategies.

Even as technology and apps are changing how we invest, there’s no substitute for learning fundamental habits that can positively influence your earnings in the long run. If you want to become a better investor, here are seven simple habits of successful investors you can start implementing today.

Investing

It might sound crazy, but if you want to be a good investor, you need to start investing. As with anything, learning how to invest money takes some practice, and the best practice comes from doing the actual thing. That isn’t to say you should start investing without a plan (more on that later), but it’s typically a lot easier to get better at something if you’re actively doing it.

It’s never too late to start the habit of investing. You can get started right now by using some of the best investment apps. Each app is different, but they all make it easier to invest and keep track of your money from anywhere. As long as you have an internet connection, you can review your portfolio straight from your phone or another mobile device.

In addition, many apps are specifically designed to help new investors get started. This could include receiving a free stock after signing up for a new account and you may only need a few bucks to make your first investment.

Having a plan

It’s always better to have a plan so you have an idea of what you’re trying to accomplish. If you don’t have a habit of creating a sound financial plan, you’re basically making decisions without any forethought of what those decisions should be building toward. In a good investing plan, you need to set your financial goals and build out the steps you need to take to achieve those goals.

Every successful investor has a plan they’re working off when they make their investments. If you haven’t set up your own plan before, here are a few tips to get you started:

  • Define your goal. What is your investment goal? Are you trying to earn more income, create a financial safety net, or grow your net worth? Whatever it is, you need to clearly define your goal for investing so you can start working toward it.
  • Make an outline. With your goal in mind, it’s much easier to make an outline of how you’ll achieve it. How much money do you need to earn? What kind of return will you need each year on your investments? How much diversification, or different types of investments, do you need to protect your capital and thrive in an uncertain economy?
  • Add to your overall financial plan. Your investment plan should be a part of your overall financial plan. Your overall financial plan should include how much debt you have, recurring expenses, savings, income, worth of assets, and anything else to do with your finances. If you know how much money is coming and going, it’s easier for you to see how much money you have available to put into investments.

Saving

It’s not unusual at all to find that successful investors are also great when it comes to saving money. Saving for retirement instead of using it on things you want right now takes willpower and patience. It’s also a good sign that you’re looking at the big financial picture instead of entirely spending your money in the present.

When it comes to the habit of saving, there’s no set rule on how much money you should put away each month or year, as it depends on your financial situation. However, many financial institutions suggest putting at least 15% of your income into savings every year. If you can do more, that’s even better. So if you make $50,000 per year, 15% would be $7,500 ($50,000 x 0.15 = $7,500). That would be $625 ($7,500 / 12 = $625) you’d need to save each month.

Of course, it’s important to keep in mind that most people typically make less money when they’re younger. As they get older they often make more money each year until they reach retirement. Knowing this, it’s still recommended to save at least 15% of your income each year, no matter what that income amount is.

Doing research

Successful investors make a habit of being lifelong learners. No matter what, investing will always be a risk because nobody can predict the future. However, with the proper research, you can minimize the risk involved by making smart decisions. Successful investors have researched their investments so thoroughly that they have confidence the risk of investing is worth taking.

Research can involve many different things, including learning about companies, following market trends, or even making sure the robo-advisor you’re using follows the guidelines you’ve set for it. Successful investors know to continue learning as much as they can about the tools and resources they use to make sure they stay successful.

Robo-advisors are digital alternatives to a traditional financial advisor. They analyze the financial information you provide them and then automatically create a financial plan based on that data. The best robo-advisors can help you meet your investment goals according to a time frame and amount of risk you assign them, taking some of the burden off you to make certain decisions. Of course, you still want to do your research and make sure your robo-advisor follows the plan you want it to.

Diversification

Diversifying your investments is a way to make sure you don’t have all your eggs in one basket, and it’s a regular habit of successful investors. This way, if one of your investments tanks for one reason or another, you’ll still have other investments to rely on. Diversification is most commonly accomplished by diversifying both the asset classes and the risk levels of your investments.

An asset class is a group of similar investments. The investments within the asset class follow the same rules and regulations as each other, but a different asset class may follow other rules and regulations. Well-known examples of asset classes include stocks, bonds, real estate, and commodities.

Asset classes typically have different risk levels involved. Savings accounts and bonds are seen as very safe investments, but they offer little in potential earnings. On the other hand, stocks are riskier because stock prices can fluctuate, but their potential payout is much higher.

To properly diversify your investment portfolio, you should have investments in different asset classes and at different levels of risk. This is the best way to make sure your investments are sound and protected, and that you keep earning in the long run.

Thinking long term

Successful investors are focused on the long term and the goals down the road, such as retiring to their dream life or paying for their kids’ college. They know a successful investment strategy doesn’t involve just a single day in the market, which is why there’s no debate for them when it comes to trading vs. investing.

Investing is a long-term strategy, whereas trading is more short term. Successful investors typically make investments with the intention of holding them for an extended period of time. Traders typically make adjustments to their investments all the time, even on a daily basis if needed. For some traders, this can end up creating quick profits, but it’s also a much riskier venture.

For successful investors, it’s about the long game. They stick with what they know and make small adjustments when they need to, but they don’t stress about daily fluctuations. Instead, they focus on extended and consistent growth to reach their goals.

Staying the course

Thinking long term pairs well with staying the course. As you focus on long-term goals, you don’t want to deviate too much from the plan you’ve set for yourself. Successful investors are in it for the long haul, which means they have to be consistent in their habits. If they know something works, they won’t adjust their investments because they’re having a bad day, week, or month. They stay the course and believe in their plan, research, and goals that led them where they are.

With this in mind, you should regularly take a step back and make sure you’re staying true to your goals by evaluating your actions. This may involve more research and learning, but it’s better than idly sitting by and watching an investment stagnate or disappear because you didn’t notice it was no longer building toward your stated goal. Yes, you may have to change your tactics now and then, especially if something major has shifted the market, but as long as you stay the course toward your goals, it’s OK to make some strategic changes.

For instance, a global pandemic may have prompted you to make changes in your portfolio, depending on what you were invested in. It pays to be aware of what’s going on in the world because it’ll help you adjust things in a way that leads you to your financial goals.

Bottom line

It’s easy to start investing, but it’s hard to instill in yourself the habits needed to become a successful investor. It’s never too late to start, though. The sooner you start investing and working on these habits, the quicker you’ll start down the path of reaching your financial goals.

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