The Mindset of a Successful Investor - Part 1 : Intro
"We are a population of sheeple." - Garth Turner
I read this in an article on CBC News that resonated with me. In a capitalist society where competition drives cost down, us sheeple participate in housing bidding wars to compete to pay the highest price possible. This is especially bad when prices are already inflated.
Buying high and selling low is the most common mistake investors make. If people buy solely based on the expectation that prices are going to move higher, they ignore the soundness of the underlying investment, which is the sole indicator of how well it is going to perform long-term.
This is exactly what happened in the 2008 financial crash.
That article goes on to make the case that:
Markets are a matter of buyer psychology, driven by greed and stopped by fear; if people just stopped playing the game, the bidding wars would vanish pretty quickly.
Now, people are not going to stop 'playing the game'.
But this captures the essence of this series of blog posts: it is people and their decisions that constitute the market. If that decision making is flawed, the market punishes it in the long-term.
Successful investors recognize this nuance, and adjust their behavior so that it leads towards good decision making and outcomes. Almost all investing advice is consequently dedicated to the 'how-to' of investing.
Little attention, if any, is given to culturing the mindset of a successful investor.
How one thinks matters. It directly influences behavior, which is nothing but a multitude of habits. These habits manifest into traits that become one's hallmark.
If your goal is to be a successful investor, then you have to emulate the traits of successful investors. That means taking a close look at their habits and behavior, all of which is driven by their mind and what goes on inside it.
If your goal is to be a successful investor, you have to get inside a successful investor's head.
These series of articles will try and do just that: explore the mindset of a successful investor, and how to culture it. I don't believe that investors like Warren Buffet were born to be great. They worked very hard at what makes them good, and if it was so easy then everyone would do it and be just as successful.
Lucky for people like yourself and I, we believe we can be like them too.