Three Habits of Highly Successful Investors

Harvard Business Review came out with a very nice piece around “Nine Things Successful People Do Differently.” Some of the habits are more obvious than others.  For instance, the article extols the virtues of getting specific about your goals, being realistic, being incremental, possessing fortitude, and maintaining focus on your objectives.  Most of it sounds like common sense although, admittedly, common sense is not as common as we’d all like to believe. The article proffers some good life-lessons that are generally relevant and applicable to all of us.  At the same time, reading the article encouraged me to relate it to what I do and the defining traits of successful investors.  Based on my experiences, there are three traits that successful investors appear to share.

1. Optimism

It is hard to be a (long) investor unless you are optimistic.  Whether you are a growth-oriented investor or a value-oriented investor chasing “fixer-upper” companies, your investment thesis is, by definition, grounded in optimism around the company’s future prospects and your ability to drive positive returns.

2. Curiosity

Most good investors strike me as tremendously curious individuals.  They are always asking “why” and have an insatiable thirst for knowledge.  An investor’s “Alpha” derives from his or her unique “edge.”  An investor’s ability to cultivate this edge usually derives from a proprietary view on a market or security, which, in turn, usually stems from an innate propensity to soak up new information and to perpetually challenge, calibrate, and confirm key assumptions.

3. Judgment

Curiosity and optimism are necessary but insufficient without the inherent decision-making judgment to be able to discern between what “looks good” versus what is “actually good.”  Good judgment comes with experience and from having built the “pattern recognition” ability that typically is a by-product of having seen and tracked hundreds, if not thousands, of investment outcomes.

There are, of course, other traits that make investors successful in their day-to-day roles.  These include, for instance:

  • Putting in the time, effort and commitment to source investment opportunities;
  • Knowing your target markets cold and having proprietary investment themes that sharpen your focus;
  • Developing a world-class network for diligence support and deal sourcing;
  • Having sufficient charisma and “sales” ability to win competitive deals;
  • Putting in the hours and showing up to help portfolio companies;
  • Possessing the credibility to obtain buy-in from your partners;
  • Etc…

I will save these (and others) for a future blog post.

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