History Says the Most Successful Long-Term Investors All Have This 1 Simple Practice in Common

Source Motley_fool

Key Points

  • The right temperament may be the most important trait stock market investors should have.

  • Thinking you’re smarter than you actually are can lead to overtrading that harms your portfolio.

  • Investors who dollar-cost average could boost their portfolio gains.

  • 10 stocks we like better than Vanguard S&P 500 ETF ›

Anyone can do well in the stock market. It doesn't matter if you're an expert with credentials from a fancy university. It also doesn't matter if you have minimal knowledge of financial analysis and research. There's one characteristic that all of these people can work on mastering, which raises their chances of achieving satisfactory returns.

History shows that the most successful long-term investors share this one simple practice.

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A person thinking and pondering with hand on chin while looking to the side.

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The mental game

While picking the right stocks and/or exchange-traded funds (ETFs) certainly matters, the best investors operate with the right temperament. This emphasizes patience, discipline, and keeping emotions in check. It has to do with your behavior. Consequently, these variables support having a long-term focus and staying the course.

A valid argument can be made that temperament matters more than intelligence. Legendary capital allocator Warren Buffett has said before that you don't need to be a genius to be a successful investor. You must simply possess the right psychological make-up. Think in terms of decades. Ignore the short-term noise.

Patience, discipline, and emotional intelligence stack the odds in your favor. On the other hand, if you believe you're smarter than you really are, it could lead to overtrading. Buying low and selling high sounds smart, but it can end in disaster.

Consider the data. According to Hartford Funds, if you missed the 10 best-performing days for the S&P 500 index from 1996 to 2025, a starting $10,000 sum would be worth $85,490. That's drastically lower than the $192,167 total return you would have had if you had just stayed fully invested. Trading frequently to avoid the bad days and capture the good days means you could've easily harmed your portfolio. The good days often follow the bad days.

With so much information flooding us these days, it can be extremely challenging to tune out the chatter. However, just remember that your strategy centers on being a long-term owner of businesses. This should keep your attention on the fundamentals and not the price chart.

Use dollar-cost averaging

Those who have the right temperament also try to invest early and often. Here's where a dollar-cost averaging (DCA) strategy comes into play. It's superior to timing the market. Investors put a fixed amount of money into their portfolios monthly or quarterly, regardless of what the market is doing. The behavioral impact of consistency matters most, as it supports a level-headed approach.

If you allocated $1,000 to the Vanguard S&P 500 ETF (NYSEMKT: VOO) a decade ago, but also invested $50 monthly, you'd have $17,676 today. That's significantly higher than the $4,225 total you would have had if you hadn't adopted DCA. This is how lasting wealth is made.

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Neil Patel has positions in Vanguard S&P 500 ETF. The Motley Fool has positions in and recommends Vanguard S&P 500 ETF. The Motley Fool has a disclosure policy.

Disclaimer: For information purposes only. Past performance is not indicative of future results.
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