An author for a financial bestseller once wrote, “There are 3 reasons why people invest: to be rich, secure and comfortable.” Then he went on to describe the difference between these three investors mindset, and how the difference create different attitude. If you were asked which is you purpose to investing, what is your answer?
No one attitude is better than the other. But we understood that most of the time, people invest to get rich.
So what is a rich attitude when investing?
The rich invests in ‘winners’. By winners, it means that they invest in something that gives them the highest return. They understand that in order to find a winner, they probably have to select it under piles of losers. There is no fix ratio but it is safe to say that out of 10 investments, they might get one or two winners.
In order to keep finding winners, the rich adopt the long term investment view. You will find, more often than not, they have different view on investment compared to retail investors, who are more interested in making short term gain. It might take three to five years before one see significant return on investment.
The other attitude that naturally comes from having a long term view is delay gratification. The rich will due their due diligence when looking at a piece of investment, and they are prepared to walk out of it if they find that the prospect is bleak. Since they are in this for the long haul, what matters is winning the war, even if that means they have to lose a few battle grounds.
But there is one attitude that sets the rich investor apart from the others: cutting the losing portfolio once they identified it.
Other investors might keep a portfolio even if it is in the red because they are hoping for some miracle to turn things around. Remember the financial crisis that hit many big investing companies not long ago? Even though it is as clear as daylight that the trend is going down and down, despite some occasional climb, average investors decided to keep their money and cross their heart.
And they lose!
But the rich are quick to retreat and view it as ‘investment lesson fee’, and decided to move on. Such attitude has prevented them from future loss and moving them closer to find more winners, and make them richer.
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