Mauldin Academy
3 Traits All Great Investors Share
By Jared Dillian, Editor of Jared Dillian’s Strategic Portfolio
People often ask me, “What makes a great investor?”
I’ve known a handful of great investors over the years, and I’ve known plenty of bad ones.
And while every bad investor has their own way to be terrible... All the good ones share a few traits.
- The first is skepticism—sure they’re curious, but they won’t believe just anything.
This is something I’ve adopted. I’m skeptical of everything I read and hear.
Of what I do.
There’s no reason not to be.
Most investors will make poor decisions, that’s a fact. If you read random articles telling you the market is swinging and you panic, that’s a poor decision.
Making poor decisions also has the surprising side-effect of teaching you humility.
Because this is investing, not baseball. Overconfidence won’t help you here.
You need to be skeptical of your own abilities.
Anything can happen, so measure the probability that it will.
Any investor will miss out on the best opportunities if they’re not skeptical.
- The second attribute is patience—they’re willing to wait for profits and won’t sell too soon.
Too many people sell too early.
To me, it’s the cardinal sin of investing.
Let’s take a simple, dumb example. You buy Apple at $10—just using small, round numbers here to make it easy.
You sell for what seems like a good profit, at $20.
It goes up to $100. Too bad.
Another example.
You’re in 1996.
People start saying tech stocks are overvalued... they won’t last. So you sell.
Then they go up—a few major twists and turns aside—for essentially the next 25 years.
Too bad.
That’s selling too early. You need to be able to let your profits grow.
And yes, it can take time.
Trends can last a lot longer than you think.
I wrote an article on being frugal, because I learned it pretty late myself.
Now, of course, you can go too far with this and end up leaving money on the table by waiting too long.
You still have to know how to pull the trigger to take the profits.
This brings us right to the last point.
- The most important attribute of great investors is emotional fitness.
Early in my career, I read all the Market Wizards books.
In those books, great investors frequently talked about how important it was to treat investing as an academic problem, not an epic struggle.
They talked about how you shouldn’t get angry, and you shouldn’t get upset.
At the time, I thought this was crap. But I was wrong.
Ever since I got my heart rate down, my investment performance has improved dramatically.
If you can’t do this, you will never be able to be a good investor. You might hit some wins here and there...
But what’s the point, if you’re constantly stressed out about them?
If you’re glued to your screen, watching the stocks go up, go down... all day long.
Not worth it.
I’m a slow learner. It’s taken me 20-plus years to learn this stuff.
But this is why I know it is so important. And why you have to learn it too.
Of course, there’s a ton of other things you’ll need to learn when it comes to investing.
But this is a start.
Jared Dillian
PS: I wrote an article about buying and holding that might be up your alley.
