To be a successful super investor, you must master the following 7 traits or characteristic features:
Trait 1. Be a contrarian investor, the ability to go against the crowd in investing. You must not be afraid to buy when most people want to sell and sell when most people want to buy as if tomorrow is too late to sell.
Trait 2. A great investor is one who is obsessive about playing the game and wanting to win. These people do not just enjoy investing; they live it. They wake up in the morning and the first thing they think about, while they are still half asleep, is a stock they have been researching, or one of the stocks they are thinking about selling, or what the greatest risk to their portfolio is and how they are going to neutralize that risk.
Trait 3. A good investor is the willingness to learn from past mistakes or to admit that he or she has bought the wrong share. It is so hard for people to recognize their own mistakes and sell the bad share which they bought at a higher price. Most people would much rather just move on and ignore the dumb things they have done in the past. But if you ignore mistakes without fully analyzing them, you will undoubtedly make a similar mistake later in your career. In fact, even if you do analyze them it is not easy to avoid repeating the same mistakes.
Trait 4. A good investor must have an inherent sense of risk based on common sense. You must have the common sense to realize the risk of buying any share which has gone up a lot and when all the analysts are recommending buy. No share can go up indefinitely for whatever reason. Quite often you might be tempted to fall in love with your purchase because it has been going up and up. You are so proud of your pick and refuse to sell it. Remember your ego can skew your judgment.
Trait 5: Great investors have confidence in their own convictions and stick with them, even when facing criticism. Buffett never get into the dot-com mania and he was being criticized publicly for ignoring technology stocks. Eventually he was proven right. Unlike Buffet, we small investors can get in and out quickly and make some profit.
Besides confidence, you must have patience to wait to buy when it is has established a base and not buy when it has shot up due to some exciting hot news.
Trait 6. It is the ability to think clearly. Our brain has 3 basic functions. One is to circulate your blood and control your breathing. The second is your emotion and the third is logical thinking. All normal investors allow their emotion to control their logical thinking process. All successful investors can think clearly when faced with a problem.
Trait 7. Finally the most important, and rarest, trait of all is the ability to live through price volatility and fluctuation without changing your logical thinking process. This is almost impossible for most people to do when the share goes through a price correction. A swing up or down over a relatively short time period is not a loss and therefore not risk, unless you are prone to panicking at the bottom and locking in the loss. But most people just cannot see it that way; their brains would not let them. Their panic instinct steps in and shuts down the normal brain function.
Most investors believe that no share can continuously go up or come down indefinitely for whatever reason. They will sell to take profit and buy back during price correction. But quite often, the correction is mild especially if the share has fantastic profit growth prospect. They would not buy back at a price higher than the price they sold.
Koon Yew Yin 官有缘 - Koon’s Investment Lesson #4: The 7 Traits