Accurate Predictions of Stock Market Moves
Someone who made accurate predictions stock market's movements recently doesn't mean that person is a successful investor. You won't have a hard time to find stock predictors from the media, however, the truth is, while we could have a reasonable confidence about the long term stock market's movement, no one could consistently and accurately predict stock market's moves in the short term or medium term.
High Short Term Returns
Someone made great returns lately, or even over past several years doesn't mean that person is a successful investor. Just like in the casinos, there are always some winners, but a truly successful investor should be able to withstand the test of time. To judge someone who is a successful investor or not, you need to see if that person could survive and beat the market in several market cycles - not just when the market is up, but also when the market is down.
High Risk High Returns
Someone achieved great returns by taking great risks doesn't mean that person is a successful investor. For example, two investors achieved same return, but one took a leverage and one didn't, clearly we shouldn't just evaluate an investor's returns, more importantly, we need to evaluate risk-adjusted returns.
In our next blog post, we would look at what are the measures we should use to evaluate a truly successful investor.