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. In a previous article, I discussed three of the traits. In this article, I want to talk about the remaining four.
The fourth trait is, to quote Sellers, an “inherent sense of risk based on common sense.” Sellers is referring to investors who trust a system or program too much and fail to step back and ask themselves whether it makes sense. I would go further than this: An investor needs to have basic common sense and ask him or herself if a deal may be too good to be true. This sort of self-questioning makes us more skeptical, which would protect us from investing in stocks or financial assets which are questionable at best, or downright frauds at worst.
The fifth trait is having confidence in your own convictions and sticking with them. It means having the ability to think independently and to resist following the crowd, even when the whole world seems to disagree with us. It is really tough to remain steadfast. To have the confidence an investor needs, we have to do proper research on our investments in order to remain mentally strong in the face of objections.
The sixth trait is interesting – having both sides of our brain (the left and right sides) working and not just one side. The left side of the brain is usually associated with logic – think math and calculations – and most people in the finance industry would be using this section of their brains as their daily work involves numbers and computations. The right side of the brain is where creativity flows, and people in the arts and music scene tend to be more right-brain oriented. Sellers is saying that it’s essential to be able to write well (right brained) as well as calculate ratios and numbers (left brained), in order to invest well – this trait is very tough for most people as they tend to be either left- or right-brained.
The final trait is the ability to live through volatility without changing your investment process. This is by far the toughest trait of all, and the psychological toll of going through intense volatility in the financial markets can make even the most seasoned investor crack. There are not many people in the world who have nerves of steel to be able to withstand volatility and fluctuations while still staying true to their investment philosophy.
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