Have a plan
Do the math
Wait
Be unemotional
Over the course of the last three weeks I have published 12 articles covering what I consider the most important traits of an investor. You can find them through these links:
Strategy, Patience, Resilience, Endurance, Zeal, Zen, Agility, Temperateness, Unbiasedness, Resoluteness, Adequateness, and Self-analysis.
And through this link you’ll find the special inspirational artwork based on my ideas.
My overarching message is that the psychology of investing is much more important than the numbers. Sure, you still have to do the math, using actual facts not opinions. And you still have to assess the competitiveness and endurance of the companies you are researching, or other fundamentals that are relevant to your style of trading or investing.
Most of all, however, you need to keep yourself in check:
Stay calm, discard good deals and wait for great ones, don’t let others rush or deter you – investing is absolute, not relative; avoid trading on emotion; use check lists to counter psychological biases…
Investing is an evolutionary mismatch and thus potentially a source of both great misfortune and opportunity. If you master your own psychology and manage to avoid easy but very human mistakes, you will find yourself leagues ahead of most market participants. It’s easy. But hard. It’s…
The Art Of Sprezzatura
What follows is an attempt at condensing 12 long articles, and even more years in the hedge fund business, into one single short article about how to become a good investor. If you haven’t already I suggest you go back and read all twelve, before or after finishing the below.
Start by forming a strategy that has a logical underpinning, as well as is a good fit with both financial history and your own temperament. I prefer a value oriented style, grounded in the microeconomic business logic of single enterprises, and supported by a macro backdrop of longer economic and stock market trends and cycles. Further, I don’t like single large bets or frequent trading, instead focusing on long term investments with geographical, industry and asset class diversification.
Practice patience both in and out of markets. I myself am patient to a fault not seldom venturing into the swamp of denial.
Keep track of your decisions and trades, your entry and exit points, your logical thinking and your feelings around those decisions. The aim is to make sure your learn something from every loss, from every gain – making you a stronger investor with every trade, no matter the result. That is the meaning of resilience. I for one could definitely do better in this area, as I occasionally exhibit unbecoming streaks of ad hoc thinking, laziness, complacency and hubris.
The screwest thing you can do
is think you’re a master of the universe
We’re all just little cogs,
and the universe will go on without us
We have to fit into it and adapt to it.
-Howard Marks
It’s easy to advise against going all-in, but harder in practice. Sometimes certain opportunities just seem so good greed gets the better of you. It might help considering that if an investment is that great, you don’t have to put very much in to make a killing. In any case the risk reward is much better that way than risk getting killed altogether. Not least, make sure the deal really is as good as you first think, rather than relying on your own track record and superiority. Talk to other people with other opinions and complementary knowledge; triangulate valuations and market positions from various vantage points
Finally, strive for a growth mindset, always learning, always improving. Analyze your hits as well as your misses in order to identify which traits were in play, which traits can be improved and how.
Money is nothing but a gauge of your progress
toward self-actualization and freedom
Investing is a lot more than just money
—-
Investing for me means building, growing, learning
and acquiring tools for
continuous learning and improvement
Summary
The 12 traits of an investor, The Art Of Sprezzatura, can be grouped together in 4 themes, where several traits often fit in the intersection between two different themes:
Patient: Wait for the right opportunity, in accordance with your plan and math
Analytical: Do the math. Track. Improve.
Unemotional: Avoid herding, hubris, greed and fear. Hope is not a strategy. Stick to the plan.
Strategic: Have a plan, a good, well-founded, one; one you can trust.
P.S. Check out the inspirational TAOS Artwork here.
More than anything else,
what differentiates people who live up to their potential
from those who don’t
is a willingness to look at themselves and others objectively.
-Ray Dalio
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Thanks for bringing this to English.
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