Mark Sellers used to be an equity strategist at Morningstar, and left in 2003 to become a fund manager at Sellers Capital, which was closed in 2008 due to tough times. However, Sellers gave an interesting and illuminating speech to a group of Harvard MBA students in 2007 in which he shared seven traits which great investors have but which cannot be learnt – you either have them or you don’t.
Although this may seem worrying to the average investor out there, I think the traits Sellers mentioned serves at least as a good checklist to see if we have what it takes to be a great investor, assuming we are totally honest with ourselves. I shall cover three of the traits in this article and the remaining four in a follow-up article.
The first trait is the ability to go against the crowd, by selling while everyone is euphoric and buying when everyone is despondent – to quote the famous investor Warren Buffett,”Be fearful when others are greedy, and be greedy when others are fearful.” According to Sellers, this psychological makeup is rare and tougher to have than one may imagine. To counteract the strong influences of crowd psychology and social proof, we need to think clearly and logically and not let emotions overtake sound judgement.
The second trait is to be obsessive about investing and to want to win, implying that a great investor should have a competitive streak. I take this to mean that an investor would always want to seek improvement in his methods and techniques so as to better his investment results and avoid serious investment errors. Sellers talked about thinking about stocks almost all day long, but for a serious investor, devoting a number of hours per day to investing should be more than sufficient for decent results. Obsession is not necessarily a healthy thing, and should be balanced by healthy relationships with family and friends too.
The third trait is a willingness to learn from past mistakes. I wrote an article recently describing why investors should document their mistakes, and apparently Sellers also agrees with this method of learning in order to avoid repeating the same mistakes again. He states that even if investors write down their mistakes, it may not be easy to avoid repeating them again! But the important thing here is to have the right attitude towards continuous learning, in order to minimize serious mistakes so as to do better overall over time.
Watch out for my next article which will cover the remaining four traits in Sellers’ speech.
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