Nature or nurture? That age old question can be applied to investing. We know that the vast majority of investors fail to beat the market (and their peers) but there are a few, the top 1%, who consistently beat the market in multiple market cycles over and over again. That raises the question: Are successful investors born or made?
Evidence Suggests A Little Of Both, But Mostly Nurture:
If you ask most extremely successful investors they will tell you that investing is a skill they developed and learned at some point along their journey. Interestingly, very few people, even the very successful ones ever say they mastered it. That is the beauty of markets, it is always intellectually stimulating and challenging, even for the most successful investors.
Here are three traits most successful investors share:
Learn From Your Mistakes:
One common trait successful investors share is that they learn from their mistakes. Most successful investors became successful after making – and here’s the key – learning, from all the classic beginner mistakes that nearly everyone makes. The big difference is that they learned from those mistakes, made more mistakes and learned again. They continued this painful process and had the perseverance and tenacity to push hard while others failed and gave up along the way.
Another trait that successful investors share is that they respect risk. I have yet to see a very successful investor achieve massive success for a sustained period of time without respecting risk. Anyone can get lucky by taking excessive risk once or twice, or even a handful of times. But in the end, if you don’t respect risk, you will get crushed at some point along the way.
Another successful trait successful investors share is that they know profits are a function of time and know the importance of being patient. Very few people can become extremely successful investors overnight. Instead, nearly every big win they enjoy is a function of time and requires some degree of patience.
What The Pros Are Saying:
Whenever possible, I like to ask people who manage money for a living and share their thoughts with you. Here are a few thoughts that are worth sharing:
Toni Bridgewater, CIO, TB45 Family Office In Montreal, Canada, told me, “Unless you are born with an exceptional talent that no one can deny, success is something that you learn in life. The reason why so many people fail is because it is not easy. If being extremely successful was easy, everyone would do it. It’s counter-intuitive but surprisingly, being unsuccessful is easy and that’s why most people chose (consciously or unconsciously) to take the easy way out.”
Samantha L. Harris, Risk Manager, AnalyzeWallStreet.com, told me, “We built a free tool that helps investors ensure their portfolio meets their risk profile (conservative, moderate, or aggressive). I can’t tell you how many people tell me they are conservative but their portfolio is extremely aggressive, or vice versa. Our free tool allows people to determine their risk profile and that, simple, and obvious step, is something that most people never take. What I’ve learned after working with thousands of high (and ultra) high net worth families is that success is not an accident.”
I love investing because anyone can acquire the skills necessary to become a successful investor. It is not easy, but it is possible. The other beautiful thing is that everyone can define success anyway they want. There is no question that nature has something to do with being successful in any aspect of life, but the overwhelming majority of evidence suggests success on Wall Street (and in most other professions) is a skill that just about anyone can learn. It may take several years or decades but with the right mindset, you can do it!