Rational Advisor

Here are the common traits that I’ve seen in excellent investment managers

Humility – The Buffetts, Dremans, Marsicos, Watsa, Cooper-Keys, and others…they ooze humility. Buffett’s folksy quip of “When you see Ajit Jain, bow deeply” is cute but speaks to Buffett’s freely admitting the expertise of others. Also, a by-product of humility is constant seeking of knowledge. Realizing one’s limitations compels one to constantly seek to know more…reading and studying…becoming a constant learning machine.

Analytical Ability – The most often thought of application of analysis is related to numerical analysis of financial statements, but analysis also relates to understanding of how business work, physics, human psychology, etc. I would argue that, while financial numerical analysis is important, that it pales to the ability to analyze facts and figures and separate them into what is important and unimportant. This is key in that for every investment out there, someone can give you 10 reasons to NOT make the investment. Where the successful rational investor differs from the non-successful investor is that the former can separate the important from unimportant and assess the relative merits of an investment based on this analysis.

Emotional Control – Let’s be honest, taking a position and seeing it drop by 20-30-50% is worrying at best and scares the living hell out of you at worst. Emotional control has shown to pay significant dividends. Emotional control is what really drives the key behaviors of successful investors.

Confidence – This is the “table” which is supported by the three legs referenced above (Humility, Analytics and Emotional Control). If one has the first three, then more often than not there is a feeling of confidence. This confidence (not cockiness, but confidence) is key to maintaining the emotional control.

There is a small subset of individuals who posess all of these traits. That is not to say that those who do not are not intelligent or will not be successful. It’s a matter of having the total package which applies to the art and science of investing.