Investor Personality Affects Success

Dec 1992

After many years working with hundreds of investors, I’m firmly convinced that [a correlation between investor personalities and investment success] exists!  For example, skeptics don’t make very successful investors—at least not in my experience.  Skeptics essentially won’t buy an investment unless it seems like a sure thing.  The problem is that by the time a skeptic feels confident with a given investment, so does everyone else.  By that time, all this confidence is built into a high stock price, and the investment isn’t a bargain.  In fact, given the market’s history of extremes of optimism and pessimism, often times the skeptic’s purchases are over-priced.  As a group, skeptics tend not to have a good grasp of the concept of risk…Successful investors have their share of home runs, but (like a good baseball player) they focus more on making solid investments (hits) than emotionally going for glory.