What makes a good investor?
By Richard West
I met Ms. Saba in Australia. I was privileged to have an hour to interview her. My question to her was two-fold, ”1) What makes a good investor and 2) How did you build your portfolio of companies?”
“There are five key characteristics are needed in order to become a good investor”, she said.
An average investor uses his/her money and invests the rest; a good investor invests his/her money and uses the rest. Investing is a risk vs. returns game.
- Goal setting - Failing to plan is planning to fail!
A good investor will always have clear goal. It is very important to have a plan to achieve the goals. Variations most likely tend to divert an investor from the agenda. Having a plan of action within a defined period of time for a particular return on investment is a sign of a good investor. They are prepared for the uncertainty of the market while the plans are usually made considering both the sides.
- Knowledge - When you know better, you do better!
Besides utilizing time to the best, a good investor possesses knowledge of the market. He/she understands the position of funds and has researched about the company investment strategy and philosophy. You need to know where your money is being utilized. A good investor analyses the growth pattern of the company over the years from genuine sources. On the accounts of the anticipations and knowledge a good investor will have a defined plan for exit point as well. An active learner who is open to make a right choice on the basic of genuinity of knowledge is a good investor.
- Right Decision - Listen to the world but do what is right!
A good investor knows the time. They keep an eye on current scenario in the market. They update their knowledge about market activities and growth. Having a sound understanding of trends enables the investors to overlook their plans and decide the term of investment. Having an understanding of current trends and company market position makes one a good investor. They own their mistakes and learn not to make them again. It’s not necessary that the good investor jumps into the trends; he/she just does what is right.
- Patience - Keep calm and carry on!
Over the period of time a good investor creates wealth due to his patience. It is probably the finest quality to have. A good investor has faith in his plans. They usually do not feel bad about the 10% downtick; they would rather sit tight to celebrate the 100% uptick. They are persistent about sticking to the plans. They usually do not get into the buy and sell trends.
- Risk Aversion - Know thyself!
Good investors know the inherent risk in investing. They understand their plans and analyze their expected returns. Being risk averse is a quality shaped by experience, knowledge and confidence over the above mentioned key characteristics.
Malini Saba’s Mantra:
“Remember to let go once you have decided to invest your money. The rest is in the hands of those you have entrusted to do the job. Thus, choose well and wisely based on analysis and research and also use your gut instinct. If you do those well, the rest is in the pudding as the British say.”