What Sets The Best Investors Apart

What Sets The Best Investors Apart

If you spend any time reading or listening to Warren Buffett talk, you’re sure to hear about one of his favorite books, The Intelligent Investor by Benjamin Graham. Originally published in 1949, Buffett claims all of his business success can be traced back to the moment he picked up Graham’s work.

2016-01-29 Intellegent Investor Book

If it’s good enough for Buffett, I figured maybe I should give it a try. So I picked it up to find out what was so life-changing about it. I was immediately surprised by what Graham claims sets the best investors apart from everyone else.

Intelligent, not smart
A name like The Intelligent Investor could easily reinforce an idea that seems central to the concept  of investing: more brains = better results. Didn’t do so well with a portfolio? Must not have been smart enough to see what was coming.

This is not the message Graham is trying to convey.  Right in the introduction he states that in his book the word intelligent “will not be taken to mean ‘smart’ or ‘shrewd,’ or gifted with unusual foresight or insight. Actually the intelligence here presupposed is a trait more of the character than of the brain” (emphasis mine).

What sets the best investors apart is their uncommon character.

A different character
The intelligent investor has the moral strength to not give in to their own greed and buy a stock based upon their “gut.” They have the ability to ignore irrational fear when everyone else is jumping off a bridge. They aren’t intelligent because they know more than everyone else. They’re intelligent because they have the discipline to think before they act. The intelligence is more about why they’re acting than what they know.

I thought this was fascinating and (at least for me) unexpected. In our firm we emphasize that financial success comes from following established principles. So I guess it should be no surprise that an investing guru believes success is a matter of principle as well.

What are those investing principles? I plan to post a short series based on The Intelligent Investor, so those answers will have to wait for another day.

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