Investing is not gambling. Becoming an investor requires skillful navigation of the markets. A good part of investing is about being interested in the financial market and the overall economy. If you think finances are boring, then investing is probably not for you.
However, mere interest doesn’t translate into investment success. If you want to be a good investor with more than satisfactory results, here are the essential skills that you really need to possess:
Ability to Do Fractions
Obviously, you would need to know basic math to become an investor of any level of success. Some potential investors do get overwhelmed by the amount of math one needs to know for day trading. Don’t worry; you don’t need calculus to trade stock. But most advisors do recommend having a solid understanding of probability. Investing involves a lot of weighing in and estimating how an asset can increase in value. A decent investor needs to have a good grasp of how probability fractions work to understand that.
No one becomes a successful investor following their gut feelings. Investors get solid returns making decisions based on probability and facts. Emotions don’t really have a say in this matter. Therefore, a good investor needs to be able to control his or her emotions to make decisions that generate returns in the future. This is partly being able to control your impulses. Unlike shoe shopping, you can’t make sudden investments decisions based on what you feel at the moment. If you are prone to impulsive behavior, you might need to learn to reign in those feelings first.
Don’t like to read dry historical tomes documenting important financial events of the past like the Great Depression or the Tulip Mania? Then investing might become a bit more difficult for you. It’s impossible for investors to predict the behavior of the market. However, similar historical events can give important clues to where a market or an asset class is generally going. Good investors, therefore, are also avid students of economic history. If you are just starting out, then get ready to ditch those airport thrillers for actual history books.
Excellent Social Skills
Investors, unlike programmers, are not lone wolves. Being in the financial world means dealing with a lot of people, often people who are difficult. Thus, investors also need a reliable set of social skills. It’s not all about mingling at cocktail parties to learn hot tips either. You will have to deal with impossible people during distressing situations. Investors also need to negotiate a lot. Doing all this requires being able to work with people diligently and respectfully. It’s hard to learn social skills as an adult, but it won’t hurt to read books about how to expertly navigate business and client relationships as an investor.
Being an investor isn’t a one-way ticket to easy money. Successful investors often spend long hours at meetings, poring over newspapers, watching the news and dealing with clients. The market is infamously volatile, so investors have to be able to keep their cool under pressure. Those who want to become serious investors will require self-discipline in this regard.
So, do you think you have the necessary skills to become an investor? It’s always possible to learn and improve if you feel you are lacking in any of the areas mentioned above.