“A mindset that can be paranoid and optimistic at the same time is hard to maintain, because seeing things as black or white takes less effort than accepting nuance. But you need short-term paranoia to keep you alive long enough to exploit long-term optimism. Jesse Livermore figured this out the hard way.” ― Morgan Housel, The Psychology of Money

There are several mental and emotional traits that are important for being a successful long-term investor, according to the Ethical Entrepreneur. The factors are:

1. Being calm and unemotional. Keep away from and ignore the over-hyped financial and headline news when it comes to investing. Avoid excitement and speculation – if your personality craves these then you may not be well suited to investing. One way to combat the adrenaline cravings is to invest using a process – develop some rules and stick to them.
2. Not being greedy. You will never, ever sell at the top and buy at the bottom with every investment you make. It’s impossible. The sooner you accept this and move on with developing your strategy, the better off you will be. If you feel yourself starting to get greedy “just another 10%”, sell and move on.
3. Not being overly fearful. Listening to daily (or hourly basis) financial and headline news is only guaranteed to stoke needless anxieties and panic, neither of which are conducive towards building wealth and investing.
4. Being focused, patient and discipline. Have a plan and strategy. Avoid making quick and rash decisions. Have the facts to make an informed decision. If you need to rush to make an investment then you’re probably sticking your leg straight into a bear trap. Stop, calm down and think about it. If it’s really a great opportunity then it will still be here tomorrow.
5. Understanding your strengths and limitations. There’s a tendency today for people to act like a guru and ‘fake it until they make it’. In some ways, a bit of confidence is a good thing, but don’t fall for your own hype. What makes you so different from the thousands of other investors in the market? What are your weak spots and what have you done to guard against them? Are you playing to your advantages and how do you know they’re better than the competition? Are you in possession of all the relevant and accurate facts and if so, can you make sense of them?
6. Being realistic. You might read about Warren Buffet and think “I could do that” but the truth is that Warren is the outlier, not the rule. You’re not going to double your money every year and you’re not going to pick winners every week. Accept it and move on. Aim for an annual compounding rate of 10-15% and consider that an almighty challenge at the best of times. If you can compound your money at 10% a year for 20 years, that will build wealth.
7. Control what you can and don’t worry about the rest. You can’t do anything about what the market thinks or feels about a position hour to hour or day to day. It might feel frustrating to watch your stock sliding backward but if you’ve done your due diligence then have faith that it will be rewarded in time. Focus on your buy price, your position size, portfolio construction and how to bank profits – clear your mind of the noise.
8. Always seek new knowledge and how to apply them. Never stop learning! There is more knowledge and understanding about the world than anyone before us; make use of it!

Writing about and discussing the psychology of investing are much easier than actually living and following them. Enjoy your life as much as you can – you only have one! If you’re not happy with something in your life, then decide what you truly want, make a plan to achieve it and set a deadline – then make it happen. Life is far, far too short for missing daily joy, peace and abundance!

You must spend some time each day considering investing rules and tactics. Consider how you will overcome the investing challenges and focus on implementing your plan. You will inevitably slip backwards at times, but discipline, patience, persistence and perseverance will help to embed them in your behavior.

References:

1. https://www.theethicalentrepreneur.com/the-psychology-of-investing/
2. https://www.goodreads.com/work/quotes/65374007-the-psychology-of-money

“Money’s greatest intrinsic value—and this can’t be overstated—is its ability to give you control over your time.” ~ Morgan Housel, The Psychology of Money

“Spending money to show people how much money you have is the fastest way to have less money.” ~ Morgan Housel, The Psychology of Money