What makes a great Investor

Chess

During a recent video interview, Charlie Munger shared his opinion on what traits are needed to be a great investor:

“I think great investors to some extent are like great chess players. They’re almost born to be investors…Obviously you have to know a lot. But partly it’s temperament. Partly it’s deferred gratification. You got to be willing to wait. Good investing requires a weird combination of patience and aggression. And not many people have it. It requires a big amount of self-awareness and how much you know and how much you don’t know. You have to know the edge of your own competency. And a lot of brilliant people are no good at knowing the edge of their own competency. They think they’re way smarter than they are. And of course, that’s dangerous and it causes trouble…

Obviously, it helps to know the basic math of Fermat and Pascal. But everybody with any sense knows that stuff. But having the temperament where Fermat and Pascal are as much a part of you as your ear and nose, that’s a different kind of a person. I think it’s hard to teach that…”

Commenting on Munger’s opinion, Novel Investor’s editor believes that the only way anybody finds out if they’re a good investor is by doing it. Reading and studying is important, but it is not enough. A book won’t tell you how you’ll feel when your portfolio drops 30%, questioning your investment strategy.  The only way anybody finds out how they handle Mr Market‘s ups and downs is to open an account, deposit some money, and invest it. It might take time but experiencing real gains and losses is the only way to find out.