Search Weight Loss Topics:

Home » How to lose weight quickly » How to be a successful investor

(MoneyWatch) Among the requirements for achieving your financial goals are:

However, having these skills (or working with a financial advisor who does) is only a prerequisite for success. They won't serve you well if you don't have the patience and discipline required. As Warren Buffett has noted, "The most important quality for an investor is temperament, not intellect."

Unless you can achieve your financial goals while limiting your investments to the safest investment-grade bonds (something very few can do), your must accept that you and your portfolio will face many "stress tests." Economic crises happen with great frequency. Over the past 40 years, investors have been confronted with more than 15 major crises, or about one every 2.5 years. And if you're like most investors, it's unlikely you can recall even the majority of them -- because they were resolved fairly quickly, though success didn't seem so clear at the time. And which investors fared the best? Those who had the patience and discipline to stay the course.

The value premium (value stocks have outperformed growth stocks) has been well documented in the academic literature. Not only has it been large and highly persistent, but it has existed in almost all developed markets (with the exception of Japan) and most emerging markets as well. However, the past five years have seen value perform poorly. This has led many investors to abandon their well-thought-out plans.

From 1927 through 2011, the annual average value premium was 4.7 percent. However, from 2007 through 2011, the value premium was negative in four of the five years, with the annual average premium being negative 3.7 percent. And it has continued to be negative in 2012, testing investor patience and discipline.

But this type performance should have been anticipated. If there weren't long periods of negative performance, there would be no risk and no value premium. The only thing unexpected is the timing of the underperformance, which we can't predict as there are no investors with clear crystal balls. Those investors who knew their financial history would have known that we had experienced similar periods in the past, all occurring during periods of financial crises. The literature demonstrates such periods is just when you should expect the risks of value companies to appear.

Clearly, these periods were difficult for value investors. That's the nature of risk. If you want to seek the higher returns of risky assets, you must accept that there will be periods, even long ones, when you will experience negative outcomes. And there can be no guarantee that even over the long term you will be rewarded for taking risk. If that was the case, there would be no risk. The premiums would be free lunches. That stocks are safe if your horizon is long enough is just another of the many falsehoods believed by many investors. The following are just two examples:

How you react during crises will determine the likelihood of successfully achieving your goals. Unfortunately, most investors, even those who use their heads to develop investment plans, allow their stomachs to take over during crises. And stomachs don't make good investment decisions. They cause us to overreact to the noise of the moment. We succumb to the mistake of recency -- the tendency to give too much weight to recent experience and ignore long-term historical evidence. Fear sets in, and panic takes over as the controlling emotion. And we lose the discipline and patience that's required to be a successful investor.

The bottom line is that while the necessary conditions to be a successful investor are that you have the knowledge of financial history and the math skills to develop a well-thought out financial plan, those conditions aren't sufficient. You also need to have the right temperament. Asking yourself, and honestly answering, these questions will help determine if you have what it takes to be a successful investor:

As you consider the answers, think back to how you felt and acted after the events of September 11, 2001, and during the financial crisis that began in 2007. Experience demonstrates that fear often leads to paralysis, or even worse, panicked selling and the abandonment of well-developed plans. When subjected to the pain of a bear market, even knowledgeable investors often fail to do the right thing because they allow emotions to take over, overriding what the brain knows is the right thing to do.

More:
How to be a successful investor

Your Full Name
Your Email
Your Phone Number
Select your age (30+ only)	30313233343536373839404142434445464748495051525354555657585960616263646566676869707172737475767778798081828384858687888990919293949596979899100101102103104105106107108109110111112113114115116117118119120
Select Your US State	Select Your StateAlabamaAlaskaArizonaArkansasCaliforniaColoradoConnecticutDelawareFloridaGeorgiaHawaiiIdahoIllinoisIndianaIowaKansasKentuckyLouisianaMaineMarylandMassachusettsMichiganMinnesotaMississippiMissouriMontanaNebraskaNevadaNew HampshireNew JerseyNew MexicoNew YorkNorth CarolinaNorth DakotaOhioOklahomaOregonPennsylvaniaRhode IslandSouth CarolinaSouth DakotaTennesseeTexasUtahVermontVirginiaWashingtonWashington,DCWest VirginiaWisconsinWyoming
Program Choice	Select Your ProgramInjectable HGHInjectable TestoteroneInjectable SermorelinInjectable Weight LossInjectable HCG DietInjectable Vitamins
Confirm over 30 years old	Yes
Confirm that you resident in USA	Yes
This is a Serious Inquiry	Yes
Message:

Home » How to lose weight quickly » How to be a successful investor