Stock Investing can be a daunting task for many. It requires a combination of different personal qualities and behaviours. Among the key qualities that can make or break an investor’s success are perseverance, focus, and the ability to make decisions. These qualities help investors can navigate the market with confidence and achieve success.
In this blog, we will explore the importance of perseverance, focus, and decision-making in investing, and how developing these skills can help investors achieve their financial goals. (Featured image credits: Photo by Engin Akyurt)
Hi, This is Venkatesh. I write on Personal Finance, Stock Investing, Productivity and Time Management. You will be interested to read more about me and the purpose of my website.
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Perseverance
Perseverance is a critical element for success in any field, and the same applies to stock investing, where losses and setbacks are inevitable. Given the volatility and unpredictability of the stock market, losses may persist for an extended period, be they permanent or paper losses.
It is easy for anyone to lose hope and give up in such situations. However, the personal quality of perseverance is crucial in keeping investors focused on their investment journey amidst challenges.
Investing is a long-term activity that involves both ups and downs. When market drawdowns occur, investors who give up may miss the opportunities provided by an undervalued market. Perseverance is essential in enabling investors to remain in the market during such times of drawdown. It provides the determination and willingness to keep going even when market conditions are unfavourable.
In summary, this quality helps investors stay disciplined and patient during periods of market volatility or uncertainty.
Focus
Having a laser focus is crucial for investors as it enables them to avoid distractions caused by short-term market fluctuations or the latest investment fads. All this lead to poor investment decisions. When an investor has a clear and defined investment strategy, they can align with it, identify potential investment opportunities and evaluate them.
However, a lack of focus can cause deviation from the investment strategy and framework, leading to emotional or impulsive decisions.
Investors need focus to dedicate time and effort to thorough research and analysis of investment opportunities and make informed investment decisions based on objective data and analysis, rather than rumors or market noise.
By combining focus with other qualities such as patience, passion, and continuous learning, investors can achieve huge success in stock investing.
Decision Making
This is another key personal quality when it comes to DIY long term investing. Decision-making is a critical aspect of stock market investing, as it directly affects the outcomes of an investment.
What is this about? You own every decision related to stock investing. A few bing
- What stock to buy?
- Hold the stock for the right period,
- Sell the stock,
- The price at which you buy a stock and
- The quantity to buy
My Own Experience
Many individuals I know who pursue DIY investing lack decisiveness. Due to this they depend on others for advice on matters such as which stock to buy and whether to hold/sell during bad times. While there is nothing wrong with seeking guidance, it is essential to take ownership of one’s decisions.
Whenever a friend comes to me with a stock idea, I offer them all the relevant information about the stock. Even when the information is clear and leads to a definitive “yes” or “no,” they remain unable to make a decision. They ask me, “Venkatesh, you tell… Should I buy this stock?”
What helps in Decision Making
There are several factors that an investor needs to consider before making an investment decision,
- You must understand the company’s financial performance, management, industry trends, competition etc.
- In order to have the above understanding you need to have the needed knowledge on tools like financial statement analysis, analyzing data and information, competition analysis etc.
- To have this knowledge, you must focus on continuous learning.
- Other qualities like managing your emotions (Particularly fear and greed) and make rational decision
Own your Decisions
This is quality related to decision making. The focus of this quality is taking accountability for the outcomes resulting from one’s decisions. Every decision that an individual makes has an outcome that may either meet their expectations or not. Such outcomes can be categorized as either good or bad.
- In most cases, people tend to take credit for favourable outcomes and consider them as a result of their good decision-making skills.
- Conversely, when the outcomes are unfavorable, they are quick to point fingers at external factors such as COVID, the economy, geopolitical tensions or government rate hikes.
Assuming responsibility for the outcome is another vital factor to consider when making decisions. One should take ownership of their decisions, regardless of whether the outcome is favorable or unfavorable. If the outcome is not as expected, the individual should take time to reflect on what went wrong and learn from the experience.
In summary, good decision-making skills are essential in stock market investing. It helps you to minimize the risk of loss and maximize the potential for gain.
This brings me to the end of the blog series on Behaviours in Investing. In case you have missed the previous blogs, there they are.
Hope you found this blog useful. Kindly share my blogs with your friends, peers and fellow investors.
