Successful investors come in all different shapes and sizes but  usually possess a common set of core understandings that differ from other, less successful investors.

1. Investing is purposeful. That is, it is entered into for some specific long run purpose – To fund retirement, to pay for a new house, for college expenses etc. Investing is distinct and different from speculation, which is mostly about short-term price movements.

2. Ultimately, risk and return are related. Staying out of the market (un-investing if you will), may seem like a good idea sometimes, but it is not a strategy for success when taking into account living cost increases.

3. Investing in stocks (or funds that own stocks) is volatile… risky, and thankfully so. The reason investors are paid a premium return (an increment above what might be earned in cash), is precisely because of this risk.  Anticipating and expecting risk is a trait successful investors share.

4. Fixed income investments (bonds, bond funds) can be incredibly risky within a period where interest rates have declined to almost zero. Bonds lose value as rates rise. The bond market, particularly the municipal bond market, can be a minefield for investors due to heavy costs (mark-ups) and a generally opaque structure.

5. Despite all the economic upheaval worldwide, stocks are primarily driven by company earnings. There is often a huge disconnect between broad economic outputs and individual company earnings. This is the instance now and it has been many times prior.

The difference between successful investors and those who are not starts with these 5 elements. On some level, these are difficult truths but they can be mastered and practiced for long-term investment gain.

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