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  • A plan is only half the battle, you need to have the right mindset too.
  • Developing these 10 top traits can improve your investing success.
  • Journaling highlights the key traits you should focus on.

Mindset could be the single most crucial thing to investment success, yet most investors spend little time considering it. That's a problem because if you don’t spend time improving your mindset, it’s unlikely you’ll stick to an investing plan.

In “The 10 Personality Traits of Successful Traders and Investors,” Real Money’s James DePorre writes, “The hard part is the actual execution of a trading plan. Consistently doing what you know you should be doing for a very long period of time is how you build great wealth in the stock market.”

Arguably, developing a plan is the easiest part of investing successfully. Stacks of books and resources online explain in detail the methodologies of top investors, yet few people duplicate their success. Why? Because most people don’t spend enough time developing the characteristics necessary to follow in the footsteps of these great investors.

10 Winning traits

In his article, DePorre highlights a collection of common characteristics that are key to making better investment decisions. Some of DePorre’s list tilts toward active investing, but most apply to investors of all shapes and sizes.

Here’s DePorre’s list, followed by my thoughts:

“1. Discipline. In recent columns, I have discussed how knowing what to do and actually doing it are two very different things. The biggest mistake that most investors and traders make is a failure to act when they know they should act. There are hundreds of things that lead to a lack of discipline, and they have to be addressed every day to succeed.

Emotion is behind every buy-hold-sell decision we make. It’s tempting to think that we can separate emotion from investing, but in reality, that’s impossible. Instead, we need to acknowledge the emotion we’re experiencing and consider what’s behind our emotional responses. Once we can categorize our emotions, it’s more likely that we’ll be able to keep them in check.

2. Patience. No matter what style of trading you use or the time frames employed, it is necessary to cultivate patience while waiting for conditions to develop. As Jesse Livermore once said "it was never my thinking that made the big money for me. It was always my sitting." However, patience can easily be misused as an excuse for lack of discipline and inaction. Even if you trade in extremely short time frames, you still have to be able to sit and wait for a trade to work the way it should.

Fear-of-missing-out (FOMO) and Fear-of-holding-on (FOHO) are two great examples of how impatience can derail us on our investing journey. If you’ve done the homework to create a plan upfront for buying and selling, then exercising patience to allow for your thesis to pan out, or for your entry or exit point to arrive, shouldn’t be challenging. If you struggle with sitting on your hands, it's time to ask yourself why.

3. Persistence. Great trading and investing is a daily slog. If you do the right things day after day over the course of many years, then you will be successful. It is necessary to deal with the misery of bear markets that may last years because they are inevitably followed by the glory of bull markets. Just keep on plugging away in a disciplined manner, and the positive results will eventually come.

This point is important to following plans regardless of the time horizon, but it makes me think of the wonders of compound interest and dollar-cost averaging into index funds, a hallmark of building wealth persistently over time. 

Too often, people overthink or deviate from their strategy when they shouldn't. For example, stopping contributions to retirement accounts during a bear market when history shows they should be increasing contributions instead!

4. Confidence. If you want to make money, you can't trade scared. You have to be willing to be aggressive when the right conditions are in place. You have to believe that you are making the right move and be able to withstand doubts and uncertainty that will always arise. A great trader has the confidence to press their bets when conditions align.

Investors have a tendency to be overconfident at the top and under-confident at the bottom. Your game plan/rules need to determine your level of confidence to succeed in the market.

5. Humility. If you aren't already a humble person, the market will eventually find a way to humble you. Great traders have many losing trades, and they will make mistakes quite often. Rather than deny that fact, it is necessary to embrace it and recognize that we are at the mercy of the stock market gods. We will learn humility on a regular basis if we trade the market, so we might as well embrace it rather than fight it.

The market will do whatever hurts the most participants! If you find yourself patting yourself on the back too often, don’t be surprised if the market reminds you of your investing ‘mortality’. Remember, most of the best investors have win rates below 60%, and many have win rates closer to or below the odds of a coin flip. Yet, they still were successful because they followed rules that let winners win and kept losses small.

6. Positive Thinking. Great traders are positive thinkers. That doesn't mean that they are perma-bulls. It means that they are always optimistic that they will find another great opportunity. The great thing about the stock market is that if you are patient and keep looking, you will find another opportunity. Bear markets are just the setup for the next round of profitable trades. Positive thinking is what keeps us motivated and prepares us for the necessary action.

Great investment ideas are everywhere. Those who believe that bad times will pass, and new opportunities will emerge like a phoenix from the ashes have been highly rewarded in the past, and I believe that remains true. Sure, a dash of skepticism can help you control drawdown in a bear market, but ultimately, optimism wins because stocks can rise to infinity but they can only fall to zero.

Objectivity. There are two sides to every trade. Great traders recognize that there is no such thing as a sure thing in the stock market. There is always someone very smart with plenty of capital on the other side, and we need to appreciate their thinking when we evaluate a trade.

Too often, investors fall into echo chambers. Don’t let that happen to you. Instead, welcome information that conflicts with your opinion. If you do, you’ll craft a stronger thesis. Moreover, it will help you better determine when your thesis is broken.

8. Self-awareness. To trade effectively, it is extremely important to be aware of the emotions that you are feeling. Are you feeling scared? Are you greedy? Are you impatient and uncertain? If you can't see these emotions in yourself, then you won't be able to address them.

This trait ties into the point I made previously about emotions. It’s very hard to be disciplined if you lack the self-awareness necessary to recognize and categorize your emotions.

9. Curiosity and Innovation. Great traders are always looking for new ideas and new approaches. Markets are always changing, and if you want an edge, it is important to look at how the environment is shifting and how new approaches may yield better results. Great traders never stop learning and are fascinated by what the market offers.

One of the most exciting things about investing is it keeps us mentally sharp. Unlike others, curious investors are better able to spot new trends and secular tailwinds responsible for some of history’s best-returning stocks. An unwillingness to remain curious and embrace innovation can result in a portfolio comprising yesterday's leaders instead of tomorrow's winners. 

10. Balance. All the characteristics discussed above have to be balanced. We need to be both patient and aggressive, humble and confident, and positive and objective. Only when we have the right balance of these characteristics will we be able to really excel.”

The Smart Play

If you’re unsure how to begin implementing strategies to develop these winning traits, consider starting an investing journal. Why? Because writing as you’re experiencing makes it easier to spot areas where you need to do some self-help work to amp up your game.

For example, if you make a mistake in sticking to your strategy (discipline), be honest with yourself. Journal the error and consider why it happened. Similarly, record incidences where you sabotage your plan (persistence), experience feelings of misdoubt (confidence), overtrade or trade too aggressively (humility), or made decisions based on an overly pessimistic long-term outlook (optimism). If you borrow conviction (objectivity) or react emotionally (self-awareness), write that down too.

Ultimately, overcoming mental ‘hiccups’ that are holding you back is key to delivering on the second half of my “plan a trade, trade a plan” mantra.

  • A plan is only half the battle, you need to have the right mindset too.
  • Developing these 10 top traits can improve your investing success.
  • Journaling highlights the key traits you should focus on.
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