Being A Successful Investor Is Partially Due To Grit And Magic

There’s two main ingredients when it comes to being a successful investor – one you have power over and one you don’t.

It Takes Grit To Be A Successful Investor

The first ingredient that makes a successful investor is grit, and the good news is, that this is the one you have some control over. The grit that makes up a good investor means that you keep investing consistently – when markets are up, you’re investing, and when markets are down, you’re still investing. No matter what political party is in office, you’re investing. If you’re having a spendy year personally, or if you’re able to sock away more funds than usual – either way (you guessed it) you’re investing. The running theme of grit is that you’re really prioritizing your financial life, and your investments as a part of that bigger financial picture.

And while it’s important to continue to invest, another part of grit that makes you a good investor is to stay invested. You can’t just continue to dump money into your investments, only to freak out at the first sign of a market drop and pull it all out again. True grit is maintaining faith when markets are up and when markets are down, and staying the course with your financial plan and investment strategy. If you think about the past two years, your investments may have likely gone down 20%, which can wreak emotional havoc on you – but as an investor, you have to keep your emotions out of your investments and allow that money to grow over the long term. Ironically, the investors that tend to be the most successful have the most grit, or they simply ignore things until they’ve calmed down and can look again. It’s all about staying invested long term and allowing compound interest to play out over time.

The Magic Of Investing

Speaking of time and compound interest, this is where the “magic” of investing comes into play. Compound COMP interest really does feel magical, as there aren’t many places (other than the markets) you can find where you can put money aside and watch it nearly double on average every 7-10 years. However, this is with the understanding that it doesn’t happen in a straight line – the process is not predictable and reliable. You can’t take a day-to-day view of the markets and make a guess as to how it will turn out. The “magic” of compounding interest is that it works over time, not day to day but over the course of many years.

The most successful investors need both the grit to stay invested so that the “magic” of time can work in their favor. While it can be difficult to remove your emotions from your investing, it helps to have an investment strategy and financial plan – both of which you may find helpful to go through with a financial professional.

By Andrew Rosen, Contributor