InvestingNook
  • Investing 101
  • Research
  • Superinvestors
  • Conferences
  • Events Schedule
  • About Me
  • Privacy Policy
  • Disclaimer
  • Contact Us
Followers
Followers
InvestingNook
Subscribe
InvestingNook
  • Investing 101
  • Research
  • Superinvestors
  • Conferences
  • Events Schedule
  • Investing 101

5 Key Traits of a Successful Investor

  • April 17, 2019
  • Tee Leng
  • No comments
  • 5 minute read

We believe that every successful value investor shares similar traits and characteristics that had played a pivotal role in their successes.

There is a lack of comprehensive studies on the relationship between these traits and success, but common sense and early research have shown promising results.

For instance, psychologists have discovered that the level of conscientiousness leads to an increased performance in the workplace, along with intellect and emotional intelligence. Of course, this is unsurprising. An individual who is hardworking and intelligent is more likely to do better in their role.

This article will highlight 5 important traits that you should work towards in order to pave your way towards having a meaningful and successful investing journey.

Patience is key

“You don’t make money when you buy stocks. And you don’t make money when you sell stocks. You make money by waiting.” – Mohnish Pabrai

Investing is a waiting game. You don’t jump in to invest under the influence of herd psychology. There are times where the market will be screaming in your face to buy or sell but you must always revisit your first principle, know that there’s nothing wrong with inaction.

“The stock market is a no-called-strike game. You don’t have to swing at everything – you can wait for your pitch. The problem when you’re a money manager is that your fans keep yelling, ‘Swing, you bum!’” – Warren Buffett

Successful investing requires a tolerance for delayed gratification. Without patience, you are likely to make impulsive and detrimental mistakes.

Necessary Arrogance

Do not confuse this with ego. There is a fine line between being confident and being self-conceited. Having high confidence in your own abilities allow you to be less influenced by the noise in the financial market.

When you know and believe in your approach, there is no reason for you to doubt your actions because the market disagrees in the short run.

This, however, is not to say that you ought to believe that you are always right but to place faith in your hard work and constantly improve on it.

“He owns many more stocks than I do — and is far less interested in the underlying nature of the business; I don’t seem to have very much influence on Walter. That’s one of his strengths; no one has much influence on him.” – Warren Buffett on Walter Schloss

Just because others are doing amazing, it doesn’t mean you should be fully emulating their methods blindly. You have to experiment, figure out what works well for you and be confident in your ability. With value investing, it will be like swimming against a current. You are adopting a contrarian mindset against the masses. Hence, some amount of arrogance would be required to keep you believing in yourself over others. Of course, never ever confuse this with over arrogance.

“There’s a virtuous cycle when people have to defend challenges to their ideas. Any gaps in thinking or analysis become clear pretty quickly when smart people ask good, logical questions. You can’t be a good value investor without being an independent thinker — you’re seeing valuations that the market is not appreciating. But it’s critical that you understand why the market isn’t seeing the value you do. The back and forth that goes on in the investment process helps you get at that.” – Joel Greenblatt

Think different, think deeper

What truly differentiates value investors from the rest is that we see beyond the surface. As Howard Marks has mentioned in his book The Most Important Thing, we should adopt a second-level thinking and not just make flimsy judgements off superficial observations.

When the market behaves in a certain manner, ask yourself if the reaction is justified or not before putting your faith in the market price.

Remember, the market is not always right.

“First-level thinkers think the same way other first-level thinkers do about the same things, and they generally reach the same conclusions. By definition, this can’t be the route to superior results. All investors can’t beat the market since, collectively, they are the market.” – Howard Marks 

The most successful investors are fully aware that the market is manic, swinging between extreme optimism and pessimism. The worst traits of the human species are often exposed in the financial market. We covet about greater profits while we hope for the worst for the others.

If you approach investing this way, you will be swept up with the rest instead.

Emotional intelligence

To perform in the financial market, you just require an average IQ. You don’t have to be a Harvard University graduate and understand fancy mathematical formulae, but you need to possess composure under high pressure. This doesn’t come naturally with a bright mind.

While being fully prepared and having a firm understanding of the financial market is a prerequisite, what is also very crucial is your execution.

If, for whatever reason, you crack under the market’s pressure and conform, all your hard work will go down the drain.

“You must have the discipline and temperament to resist your impulses. Human beings have precisely the wrong instincts when it comes to the markets. If you recognize this, you can resist the urge to buy into a rally and sell into a decline. It’s also helpful to remember the power of compounding. You don’t need to stretch for returns to grow your capital over the course of your life.” –​ Irving Kahn

Not everyone is blessed with superior emotional intelligence, some are more neurotic than others. This does not mean that you are doomed and should steer clear of the market regardless.

Being aware of these facts will develop your emotional intelligence. Allow common sense and rational thinking to take the wheel as you plan to make your next investment decision. Knowing your weaknesses will allow you to come up with a structure for you to be prepared when the time calls for it.

Know your motivation

This is arguably one of the most important point out of the five.

Most value investors, like Warren Buffett, do not work solely for the money, they are more interested in the game. The returns they generated are viewed as a point tracking system more so than anything else.

Passion drives their career, not money.

Money is important I fool you not, but an over-obsession will backfire. The more you desire, the more unachievable it becomes.

Approach investing with the right and healthy mindset, with discipline, your results will speak for itself.

To summarize, we have shared with you five important traits that a value investor should develop to become successful:

  1. Patience
  2. Necessary arrogance
  3. Be different and be right
  4. Emotional intelligence
  5. A passion for investing

Total
1
Shares
Share 1
Share 0
Share 0
Share 0
Tee Leng

Tee Leng is a portfolio manager of a value-focused investment fund based in Singapore, with more than 5 years of experience. He is a frequent guest speaker at institutions such as University College London (UCL) and Singapore Management University (SMU), and at investment conferences held in Singapore and Jakarta.

Previous Article
  • Investing 101

Diversification, The Way To Reduce Risk

  • April 12, 2019
  • Tee Leng
View Post
Next Article
  • Investing 101

The Importance Of Having A Circle Of Competence

  • April 19, 2019
  • Tee Leng
View Post
Search
Featured On:
UCL SMU SGX Academy RHB Securities TheEdge Singapore MoneyFM 89.3 TheFinance.sg ValueWalk
Investment Ideas

Instagram

Weekly Newsletter

Get access to our top ideas, research and subscriber-only premium articles for FREE

Copyright 2018 © InvestingNook, All Rights Reserved.

Input your search keywords and press Enter.