Thursday, August 13, 2009

* 7 Investor Traits to Achieve Success

This is a guest post from one of DIV-Net's finest value investors, Jae Jun of Old School Value blog:

I'm not here to teach you how to be a great investor. On the contrary, I'm here to tell you why very few of you can ever hope to achieve this status.

It doesn't matter how intelligent you are, how many books you've read or how good you are with numbers. The truth is that you may never be as good as you think.

This was a speech by Mark Sellers of Sellers Capital to Harvard MBA student's in 2007. It was also one of the handful of good reading material that helped me to look beyond numbers and performance in my early investing career.

It is a speech that helps to expose weaknesses and build on your strengths.

You can read all of Berkshire's letters, Buffett's words of wisdom but when it comes to crunch time, why do so many people fail to even beat the market let alone compound their money at extraordinary rates?

7 Investor Traits Needed for Mind-blowing Success


Off the top of my head out of 5 people I spoke to regarding value investing, 3 never understood the concept of buying half dollars and 1 took a while to come around.

So think of the list below as an investors moat. If a majority of the traits is hard wired into your self, it is an advantage that is absolutely sustainable.

The following can't be learned but I do believe it can be obtained under training and fine tuned to become a formidable competitive advantage over other investors.

Trait #1 - Ability to buy and sell stocks against the market
Everyone thinks they can do this...[when] the market is crashing all around you, almost no one has the stomach to buy.
Trait #2 - Obsession
The second character trait of a great investor is that he is obsessive about playing the game and wanting to win.
Trait #3 - Willingness to learn from past mistakes
What sets some investors apart is an intense desire to learn from their own mistakes so they can avoid repeating them.
Trait #4 - Inherent sense of risk based on common sense
I believe the greatest risk control is common sense, but people fall into the habit of sleeping well at night because the computer says they should.
The thing about common sense is that it isn't very common.

Trait #5 - Confidence and Conviction
Great investors have confidence in their own convictions and stick with them, even when facing criticism.
Trait #6 - Get both sides of your brain working
If you don't think clearly, you're in trouble. There are a lot of people who have genius IQs who can't think clearly.
Trait #7 - Ability to live through volatility
The most important, and rarest, trait of all.
Reading and analyzing financial statements can be learnt and copied by anyone. The above 7 traits cannot.

This isn't something you've heard the first time, but I believe it to be an awesome and concise reminder in the midst of a huge rallying market we have now.

Jae Jun is the author of Old School Value, a value investing blog that focuses on fundamental analysis, investment spreadsheets, investment ideas and commentary.