It wouldn’t be difficult to believe investments are nothing more than a random game of chance. Investors learn what they can about how the market works and the rest is out of their hands. The difference between an investor who mostly has good returns and one who mostly makes bad ones is all up to how lady luck favors them.
Or, perhaps, when there is a pattern of one investor doing better than another, there may be a factor of personality at play.
Fixed Mindset vs Growth Mindset
Stanford psychologist Carol Dweck literally wrote the book on this subject. Her successful book, Mindset: The New Psychology of Success included her research on the matter of fixed mindsets and growth mindsets.
Fixed mindsets, she found, were more commonly associated with people who were naturally intelligent or had ability that came easily to them. These people succeed at new things without having to put a lot of work and time into them. When they do something more difficult for them where they would have to try for a longer time, and possibly even keep going past failures, they give up. This limits them to whatever comes easily to them.
Growth mindsets are more common with people who have a harder time learning new things. These people are used to having to learn new things. They understand how to stick to something until they find success. They have learned dedication and how to work hard. Because they understand that effort and hard work can bring great success, they are more likely to show persistence against obstacles. They understand that just because something is difficult doesn’t mean it’s impossible.
How Mindset Affects How We Invest
Many investors get started with low-return investments and then find a comfort zone. They become used to these investments and the predictability it offers and don’t want to go beyond that. When they reluctantly dare to go further with some equity mutual funds, they find things are more difficult. Those with a growth mindset will stick with it. They will have a few failures, but continue learning how things work. They will push themselves to find success. Investors with a fixed mindset will jump back to what they know; immediately deciding that these kinds of investments simply don’t work, aren’t for them, and are a trap for other people.
Does This Mean You Need to Change Your Mindset To Find Success?
Maybe, but maybe not. Instead of fighting your mindset, you may see better returns by playing to your strengths. If a person is more inclined to think one way, and they then invest in equity, the stress of the uncertainty and the market’s constant shaking could convince them to abandon any investments at all, and that’s not a good plan for anyone.
Instead, the better play could be to examine your mindset, know yourself, and then play to that. If you find one path too stressful, don’t let the convince you to abandon investing. Instead, look at other ways that might work better for you so you will see your best returns in the long run.