Millions of Americans quietly get rich by simply working hard and investing over long periods. But what are the habits that allow them to stay the course and build such wealth?
Recently, Fidelity asked 2,007 self-directed, everyday adult investors in the U.S. to reveal the trading behaviors and attitudes that helped them feel successful about advancing toward their financial goals over the past five years. The survey was part of Fidelity’s first-ever State of the American Investor study.
The survey respondents were not ultra-rich. Rather, they reported a household income of $25,000 or more and investable assets of at least $25,000 that did not include retirement accounts and real estate.
Here are the three major traits these investors say helped them to succeed.
Keeping a level head amid volatility
Once you begin to purchase stocks, it is impossible to avoid volatility. Every investor knows the heady rush of seeing their portfolio swell, as well as the heart-pounding anxiety of helplessly watching their net worth suddenly plunge.
Successful investors accept these market ups and downs as being unavoidable. In the survey, 60% of successful investors agreed that market volatility is to be expected. And nearly half — 45% — view dips in the market as opportunities to put more money to work.
Taking risks confidently
It is tough to succeed in investing if you are determined to avoid all risk. Investing comes with the inherent danger of losses, some of which might be permanent.
However, avoiding taking on excessive risk can mitigate the potential damage of a bear market or a bad investment. Finding the right balance between risk and potential reward is crucial to investment success.
In the Fidelity survey, 85% of successful investors believe they take on the right amount of risk to achieve their goals.
Making research-based decisions
One way to get rich slowly over time is simply to put money into an index fund — such as one that tracks the S&P 500 — month after month, year after year. This is the pathway to riches that legendary investor Warren Buffett recommends as best for most people.
If you decide to invest in such an index, you probably don’t need to do much research. Instead, you simply must have faith that American and international businesses will continue to perform well in the aggregate over time.
However, some investors skip index funds and instead try to beat the market by purchasing individual stocks or actively managed mutual funds and ETFs. If you choose this pathway, it’s crucial to do your homework first.
Among successful investors, 45% say they consider the historical performance of an investment before they add it to their portfolio.
If you are ready to begin investing in stocks, check out Money Talks News founder Stacy Johnson’s advice in “2-Minute Money Manager: How Do You Start Investing With Little Money?“
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