It's perhaps the most asked question when it comes to investing: "How do I get better?" The statistics don't lie. There is no such thing as the "perfect investor" -- the best of the best tend to be wrong around 30% to 40% of the time -- yet we continually strive to learn and better ourselves so we can achieve our goal of financial freedom in retirement.
Not surprisingly, there is no shortage of investment advice out there on how you can become a better investor. In fact, a quick search through Google of "how to be a better investor" yielded 122 million hits. A lot of the advice offered is relatively similar. This isn't to say it isn't great advice; it's just that it's been said a couple (thousand) times before. Ideas such as "buy what you know," invest for the long-term, understand your risk tolerance, and resist the urge to buy penny stocks, are all fantastic nuggets of wisdom that work.
But, what I rarely see emphasized are the nontraditional ways that people can better themselves to become better investors. Sometimes these nontraditional means have nothing at all to do with investing. They're all about bettering yourself and finding your happy place so you can become a better investor.
Sound a little too good to be true? Don't worry, even I was skeptical at first that happy investors would make for better investors. However, a study conducted by Monash Business School, in cooperation with Bar-Ilan University and the Hebrew University of Jerusalem, suggests otherwise.
On top of discovering that happiness is contagious when it comes to a country's soccer team winning a match, researchers discovered that far more than economics played into the movements of a stock market. Investor sentiment, which can be affected by weather, played a role in average investment return expectations. Warmer weather often yielded brighter investment outlooks, whereas the opposite was true of dark and/or cooler months.
While I'm sure we could nitpick some of the controls in Monash Business School's study, it highlights the simple idea that a happy person is usually going to be a better investor because they have a brighter long-term outlook.
Five ways to be a better investor that have nothing to do with investing
How can you really become a better investor? I'd suggest focusing on five nontraditional methods that have essentially nothing to do with investing.
1. Put your family and friends first
You might want to file this one under common sense, but I think everyone can use a reminder from time to time that there's nothing more important in life than your family and friends. They are the foundation that holds you up, and your investments should be coming in a distant second. Everyone hits a rough patch from time to time, and you simply can't get the comfort or advice you're looking for to get back on track from a 10-Q filing.
2. Go to college
While the cost of going to college continues to rise, saddling graduates with rising levels of student loan debt, the opportunities that college affords people still makes the journey well worth it.
In February 2014 the Pew Research Center noted that the median annual income for a millennial aged 25 to 32 with a high school diploma was just $28,000 (based on 2012 dollars) compared to $45,500 for a millennial of the same age range, but with a four-year degree or higher. College, which is arguably necessary to landing a well-paying job nowadays, gives you the opportunity to climb the socioeconomic ladder, which in turn could reduce money-related stress and make you happier over the long run.
3. Pick a career that you love
Third, you need to pick a career that you love. Sure, you might make $250,000 a year being a surgeon, but if you don't love your job you'll be miserable -- and that pessimism may adversely affect how you invest. Picking a career that you're passionate about will keep you motivated to make both yourself and the world around you a better place. Seeing things in a "glass half-full" approach can actually be quite useful when researching investment opportunities that have the potential to improve the quality of life for society.
4. Take vacations
Don't forget to take some "you" time along the way, too. Taking vacations (either alone or with family and friends) yields numerous benefits that can help you with your job as well as your portfolio.
First, vacations give your brain a much needed break. I know I love following the stock market, but even I make sure to unplug from time to time. Secondly, some of your best inspiration can happen when you step outside of your normal routine. Finally, vacationing makes you happy, and as we saw from the study above happiness can be an important component when it comes to having a bright long-term investment outlook.
5. See a doctor
Lastly, don't forget about your personal health. I don't know too many people who enjoy going to the doctor on a regular basis, but catching potentially chronic or life-threatening ailments early is far better than the alternative. Plus, going to the doctor for preventative care early and often can potentially save you from high medical costs later in life. If you're healthier, you're likely to be happier -- and that's a good thing all around.
The next time you're looking for an answer on how to become a better investor, consider stepping outside the box and applying these nontraditional suggestions to live a happier, healthier, and potentially wealthier life.
Sean Williams has no material interest in any companies mentioned in this article. You can follow him on CAPS under the screen name TMFUltraLong, track every pick he makes under the screen name TrackUltraLong, and check him out on Twitter, where he goes by the handle @TMFUltraLong.
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