1. They know how to use leverage to their advantage
What’s the major difference between a successful investor such as Warren Buffett and the average investor? My answer is this; a successful investor knows how to make money by investing with other people’s money while an average investor invests with personal funds.
Investing with other people’s money is a form of leverage.
“The most important word in the world of money is cash flow. The second most important word is leverage.” – Rich Dad
Other people’s money is not the only form of leverage an investor can utilize. Your leverage can be your professional team, your investing experience or inside information.
“Financial leverage is the advantage the rich have over the poor and middle class.” – Rich Dad
“If you owe the bank $100, that’s your problem. If you owe the bank $100 million, that’s the bank’s problem.” – J. Paul Getty
2. They learn quickly from their mistakes “Even a mistake may turn out to be the one thing necessary to a worthwhile achievement.” – Henry Ford
When investors talk of experience, they are simply talking about the trials faced, mistakes made, lessons learned and triumphs achieved.You can never become a successful investor without making some miscalculations or mistakes. Successful investors make mistakes but they are not discouraged by these mistakes because they know mistakes are part of the process to becoming a better investor.
Average investors perceive mistakes as bad but successful investors see mistakes as an opportunity to learn something new. “Only those who are asleep make no mistakes.” – Ingvar Kamprad
3. They have a team of professional advisors
“It is better to hang out with people better than you. Pick out associates whose behavior is better than yours and you will drift in that direction.” – Warren Buffett
If you observe successful investors closely, you will notice they have a team of professional advisors.
Average investors try to beat the market alone while professional investors invest as part of a team.
Successful investors also have a network of friends made of professional investors.
They share advice and brainstorm on investing challenges with their investor friends. Do you want to become a successful investor? If yes, then it’s time to start choosing your friends carefully.
Remember, birds of the same feather flock together.
“I have been within the four walls of school and I have been on the street. I can confidently tell you that the street is tougher, challenging, daring, exciting and more rewarding. In school; you play alone. But on the street, you play with the big boys.” – Ajaero Tony Martins
4. They have a strong financial background “Business and financial intelligence are not picked up within the four walls of school. You pick them up on the streets. In school, you are taught how to manage other people’s money. On the streets, you are taught how to make money.” – Ajaero Tony Martins
Just as stated in the quote above, you only become a better investor by being on the streets. Successful investors have a solid financial foundation; a foundation molded on the streets.
On the streets, you learn from your own experience. Successful investors build up their financial base by attending seminars, reading books and journals, learning from a mentor and listening to tapes; after which they go out on their own to gain street experience.
Average investors try to hone their investing skills while still striving to avoid loss. Successful investors on the other hand know that experience come with losing money and learning from the loss.
5. Successful investors are passionate about investing “Men of means look at making money as a game which they love to play.” – J. Paul Getty
Why are you an investor? Your answer to this question will determine if you will be successful in the world of investing or not.
A famous author once said this: “if you are going to play a game, choose a game you can play throughout your life time and investing is one of such game.”
If you take a look at average investors, they are always after how much they are going to make now but successful investors use delayed gratification and compounding to gain an edge.
“Wealth is only a benefit of the game of money. If you win, the money will be there.” – J. Paul Getty
Finally, these characteristics are usually possessed by most successful investors. If it’s your desire to join this league of investors, all you need to do is gradually develop these characters. I want to state categorically that becoming a successful investor is within your reach. Just model the masters of the game and you will see yourself improving. Best wishes and have a wonderful New Year ahead.
Read Part 3 Here.