An investor’s wealth mindset can often determine their investment success. What kind of wealth mindset do you have?

Investing requires the right wealth mindset in order for you to be successful—and here are four common investor wealth mindset mentalities:

Statistical bears. These overly cautious pessimists lack imagination. When stock investing, they zero in on a handful of statistical measures—earnings, dividends, the length of time the market has been rising and how much it has gained. If they see a resemblance between today’s figures and those of past market peaks, they assume stock prices are headed for collapse. Unfortunately for them, many reached that conclusion years ago, when prices were much lower than today.

It’s a mistake to narrow your field of vision when stock investing. Statistical bears take it to extremes. They’re a little like 19th-century engineers who studied bumblebee anatomy and concluded that bees simply could not fly, according to known laws of physics. The laws of physics never change, but our understanding of them continually expands. That’s also true of our knowledge of stock investing.

Starry-eyed bulls. These optimists have too much imagination and too little caution. They accept or develop overblown ideas of the potential of each new stock they invest in. But they neglect to consider what can go wrong. Having invested too heavily themselves, they try to get friends and relatives involved, as well.

Skeptical optimists. Experience tells these investors that it pays to take an optimistic view, but to temper it with hard-edged skepticism.

These investors study market indicators and statistics, but see them in light of changing accounting rules, as well as trends in interest rates and the economy. They do sometimes get excited about junior stocks, but they recognize that new or unproven companies involve extra risk. After all, mineral finds are valuable because they’re rare, and technological innovations face heavy competition.

But above all, skeptical optimists recognize that they are investing in a company, rather than an economy, a mineral find or a product. So they focus their stock investing on companies that make money, pay dividends and serve customers well. In the end, these are your surest signs of a successful investment.

The wrong kind of wealth mindset

Momentum investors are those investors who favour making a quick buck on the so-called “positive earnings surprise,” when a company outdoes brokers’ earnings estimates. They view a “negative earnings surprise” —lower-than-expected earnings—as a sell signal. They use a variety of formulas to make buy and sell decisions, but all come down to “buy on strength and sell on weakness.” So they tend to pile into the same stocks all at once, and the gains that follow are something of a self-fulfilling prophecy. They lack the right kind of investing wealth mindset.

The key problem with a momentum investors mindset is that when the stock’s rise falters, momentum investors try to get out as a group, but there are never enough buyers. This leads to violent price fluctuations for these stocks, or ETFs that hold them. When you hear that a stock reported a 10% earnings gain and its shares dropped 25% to 50%, it often means that the momentum investors who owned it were hoping for, say, a 15% earnings gain.

It’s natural to be tempted to try a momentum investing approach by leapfrogging from one stock to another, and routinely switching out of the laggards in your portfolio and into stocks with better performance. But basing investment decisions on performance alone is bound to cost you money sooner or later.

That’s because it raises your risk of investing in a stock that owes its performance to having gambled and won. When a gambler’s luck turns sour, you may give back all of your winnings and more besides.

Our advice is to have the wealth mindset of skeptical optimist in your own investing philosophy.

Did any of these investing wealth mindsets sound like you? Do you feel like your wealth mindset has changed over the years? Share your thoughts and experience with us in the comments section.