The 5 Traits Of The World’s Most Successful Investors

Here are the five key traits of the world’s most successful investors.

The content of this article was relevant at the time of publishing. Circumstances change continuously and caution should therefore be exercised when relying upon any content contained within this article.

When investing, your capital is at risk. The value of your investments can go down as well as up and you may get back less than you put in.

Read More

The content of this article is provided for information purposes only and is not intended to be, nor does it constitute, any form of personal advice. Investments in a currency other than sterling are exposed to currency exchange risk. Currency exchange rates are constantly changing, which may affect the value of the investment in sterling terms. You could lose money in sterling even if the stock price rises in the currency of origin. Stocks listed on overseas exchanges may be subject to additional dealing and exchange rate charges, and may have other tax implications, and may not provide the same, or any, regulatory protection as in the UK.

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More.

Every investor sets out with the goal of trying to beat the market. A few even dare to think that they can become next Warren Buffett. Unfortunately, the harsh reality is that few manage to even come close to this goal.

Nevertheless, you can improve your chances of success. There’s no sure-fire strategy to riches, but by studying the world’s most successful investors we can pick up a few tips to help improve our chances. 

1. Have a strategy

Arguably the most important trait of the world’s greatest investors is the ability to set out with, and stick to, a clear strategy. 

It doesn’t matter which approach you choose, whether it be growth, value, income, deep value, distressed investing, momentum investing or day trading, whichever route you go down, it is key that you stick with the strategy. 

Almost all of the world’s most successful investors, the like of Peter Lynch, Warren Buffett, John Templeton, Neil Woodford and Charlie Munger have all stuck with one strategy throughout both the good times and the bad. 

2. Never stop learning 

“If you stop learning, the world rushes right by you.” — Charlie Munger

Charlie Munger, Warren Buffett’s right-hand man, is arguably one of the most influential investors of all time. It’s his philosophy that investors should never stop learning, and they should always seek to improve existing skills.

Research has shown that for anyone to truly become an expert at something, it takes 10,000 hours of practice. The only way to reach this goal is to continually seek out new information. 

Charlie and Warren always read for several hours each day to increase what Charlie has called their “worldly wisdom”. 

3. Ask what could go wrong, not what could go right

Most investors invest with the wrong frame of mind. Indeed, when assessing an investment, most will as “what’s the upside here?” or “how much can I make?” 

But in most cases, investors should constantly be asking “how much can I lose?” 

This is the advice of the world’s most prominent hedge fund manager, Ray Dalio. Overseeing $170bn of client money, Ray Dalio’s fund Bridgewater has only lost money in three of the past 30 years — an unbeaten record. 

Dalio attributes his success to the fact that he’s terrible at making decisions. He’s always looking for someone to shoot a hole in his theses and tell him that he is wrong. Being overconfident in this business can cost you a lot of money. 

4. Know your strengths

Everyone has their own strengths, and weakness. Each investor has a company or sector that understand more than most. 

It’s important that you invest inside your circle of competence. There’s no faster way to lose money than investing in something you don’t understand. If you can’t figure out what a company does or how it makes money, it’s often best to stay away, no matter how lucrative the opportunity might be. 

5. Admit your mistakes 

At one point in time, every investor has made a mistake. It’s just part of the business. The best way to act on a mistake it to accept it, learn from the mistake and move on. 

“There’s no way that you can live an adequate life without many mistakes.  In fact, one trick in life is to get so you can handle mistakes. Failure to handle psychological denial is a common way for people to go broke.”  — Charlie Munger

Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be assessed. Consider taking independent financial advice.

Rupert Hargreaves has no position in any shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.

More on Investing Articles

Investing Articles

6 stocks that Fools have been buying!

Our Foolish freelancers are putting their money where their mouths are and buying these stocks in recent weeks.

Read more »

Google office headquarters
Investing Articles

1 reason I like buying S&P 500 shares – and 1 reason I don’t

Will this investor try to improve his potential returns by focusing more on S&P 500 shares instead of British ones?…

Read more »

Young woman holding up three fingers
Investing Articles

3 SIPP mistakes to avoid

Our writer explains a trio of potentially costly errors he tries to avoid making when investing his SIPP, on an…

Read more »

Smiling white woman holding iPhone with Airpods in ear
Investing Articles

Here’s how (and why) I’d start buying shares with £25 a week

Our writer uses his investment experience and current approach to explain how he would start buying shares on a limited…

Read more »

Aerial shot showing an aircraft shadow flying over an idyllic beach
Investing Articles

Here’s my 5-step approach to earning passive income of £500 a month

Christopher Ruane explains the handful of steps he uses to target hundreds of pounds in passive income each month.

Read more »

Investing Articles

2 UK shares I’ve been buying this week

From a value perspective, UK shares look attractive. But two in particular have been attracting Stephen Wright’s attention over the…

Read more »

Investing Articles

A lifelong second income for just £10 a week? Here’s how!

With a simple, structured approach to buying blue-chip dividend shares at attractive prices, our writer's building a second income for…

Read more »

Investing Articles

Here’s how I’d use a £20k Stocks and Shares ISA to help build generational wealth

Discover how our writer would aim to turn a £20k Stocks and Shares ISA into a sizeable nest egg by…

Read more »