Monday, July 31, 2017

On success as an investor

According to Peter Lynch (the legendary fund manager of Fidelity Magellan) the qualities related to success as an investor are:
  • patience
  • self-reliance
  • common sense
  • a tolerance for pain
  • open-mindedness
  • detachment
  • persistence
  • humility
  • flexibility
  • willingness to do independent research
  • willingness to admit mistakes
  • ability to ignore general panic

Out of the above list I think willingness to admit mistakes is the hardest. Acting on a mistake is actually even harder as this typically involves selling a stock at significant loss.

Over the 20+ years of investing I have gradually got better at avoiding mistakes. It is extremely rare to find a bargain selling at open market. Low P/E and P/B are typically there for a reason (look for them!). Same with very high yeild.

Out of the all "great ideas" I have had over the years very few have been actually great. I think roughly equal amount (if not more) have been in the exact opposite category. So I tend to be sceptical with regards to any "great idea" that I come up with.

Mistakes do happen when inveting directly into individual stocks as opposed to picking a safe ETF tracking sensible idex.

That's why adequate diversification is paramount.

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