Like any activity where the results are affected by talent, some people are born to be great investors; but most are not. Most private investors fail to match the returns of professional investors, and most professional investors fail to match the returns of a simple index tracking strategy.
However, great investors do exist and, although you cannot change your innate talent, there are many things you can do if greatness is what you aspire to.
Greatness is largely a matter of conscious choice, and discipline
I’m a big fan of Jim Collins, the author of several outstanding business books including Great by Choice: How to Manage Through Chaos, and Good to Great: Why Some Companies Make the Leap and Others Don’t. What I like most of all is the way he breaks down complex questions into a small number of critical behaviours, and then structures and frames them in a memorable way.
His books have been massively successful, far beyond their original business sphere because many of the ideas are applicable to life in general as well as business, and I think many of them apply to the world of investing too.
Here are some of the key ideas from Great by Choice which are paralleled by the actions of many great investors, and which can be learned and applied by those who aspire to be great investors themselves.
Clear Eyed and Stoic
“great [investors] accept, without complaint, that they face forces beyond their control, that they cannot accurately predict events, and that nothing is certain; yet they utterly reject the idea that luck, chaos, or any other external factor will determine whether they succeed or fail.”
The first lesson from Great by Choice is that the world is a harsh and uncertain place, and yet to be successful you must believe that you are responsible for your success or failure.
This is an especially difficult idea to apply in the world of investing, where in the short-term luck is as big a factor as skill. Although luck may dominate the results of any individual investment (for example my investment in UTV Media returned over 40% in just 7 months which was as much luck as anything else), in the longer-term your ability to make the right decisions will be the most important factor.
Because of that, your long-term results are down to you,…
