Being a successful investor and having the Instagram account of a successful investor are two vastly different things. One is quite difficult to do, and the other is fairly easy. If you want to be the former, you will likely have to abandon the mentality of the latter.
Being a successful investor could be called a “get rich slow” scheme, whereas it’s often pitched as a get rich quick scheme on the ‘gram. Successful investors have several habits that they stick to, consistently, and rack up slow and steady gains over a long period of time. Instagram investors typically espouse a different strategy, complex options trades, shorting, margin, that sort of thing.
Pulling off those strategies usually is much more difficult than it seems, and what’s more, you open yourself up to being completely whipped out by so-called black swan events, which contrary to the name they are given, happen at fairly regular intervals.
So what are the habits of successful investors? There are actually several habits that almost all successful investors develop. The first habit is successful investors seldom, if ever, make large moves at one time. This is because in the long term, it is very easy to predict the direction of either the market as a whole, or a sector, and even a single stock. But in the short term, it’s impossible. There are simply too many factors at play to predict what will happen in the short term.
Successful investors have the habit of playing the long game. A good mental test for yourself when you decide to buy a stock is to ask yourself what would you do if this stock drops the week after you buy it. Successful investors are not just mentally prepared to see their stocks drop in the short term, often they are kind of hoping for it. Since they didn’t buy a huge position right off the bat, the drop has given them the opportunity to buy more at a discount. So what if you only buy a small position and it immediately shoots up before you have an opportunity to scale into it more. Talk about a high quality problem.
Successful investors don’t chase stocks and know that there are alway many more opportunities ahead. Compared that to the unsuccessful investor. Chasing trendy stocks, making huge short term trades, often on margin, the unsuccessful investor does not realize the risk/reward equation falls way out of their favor when they adopt these strategies.
Successful investors may or not take risks. You certainly can be successful without taking on much risk, but most successful investors are quite comfortable with risk because they have a much different mentality about risk than unsuccessful investors.
Unsuccessful investors think things like, “I am comfortable with risk.” or “I am young, I can make it up if I lose something now.” That may be true but it doesn’t get to the heart of the matter. Successful investors ask a much more refined question about risk. They ask, ”Am I getting paid appropriately for the risk I am taking?” If you are shorting or using margin, the answer is almost certainly a big no. If you are trading options, it’s a lot more complex, but still probably no in many cases.
Wondering how to start investing? Make small moves, ask yourself if you are getting paid appropriately for the risk you are taking, play the long game, and most importantly, don’t get caught up in emotions. If Warren Buffet had an Insta account, do you really think he’d be sharing memes on it?