Monday, November 05, 2007

A must read for would-be investors

The way I see it, there are at least seven traits great investors share that are true sources of advantage because they can't be learned once a person reaches adulthood. In fact, some of them can't be learned at all; you're either born with them or you aren't.

Trait #1 is the ability to buy stocks while others are panicking and sell stocks while others are euphoric. Everyone thinks they can do this, but then when October 19, 1987 comes around and the market is crashing all around you, almost no one has the stomach to buy. When the year 1999 comes around and the market is going up almost every day, you can't bring yourself to sell because if you do, you may fall behind your peers. The vast majority of the people who manage money have MBAs and high IQs and have read a lot of books. By late 1999, all these people knew with great certainty that stocks were overvalued, and yet they couldn't bring themselves to take money off the table because of the "institutional imperative," as Buffett calls it.
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