Reflections on the Ten Attributes of Great Investors

make a point of reading material you do not necessarily agree with. Find a thoughtful person whoholds a view different than yours, and then read his or her case carefully. This contributes to being activelyopen-minded.

10. Read (and keep an open mind).

Proper portfolio construction requires specifying a goal (maximize sum for one period or parlayed bets),identifying an opportunity set (lots of small edge or lumpy but large edge), and considering constraints(liquidity, drawdowns, leverage).

9. Position sizing (maximizing the payoff from edge).

Yet investing is an inherently social exercise. As a result, prices can go from being a source of informationto a source of influence.  Great investors don’t get sucked into the vortex of influence. This requires the trait of not caring what others think of you, which is not natural for humans. Indeed, many successful investors have a skill th... See more

8. Know the difference between information and influence.

Keith Stanovich, aprofessor of psychology, likes to distinguish between intelligence quotient (IQ), which measures mentalskills that are real and helpful in cognitive tasks, and rationality quotient (RQ), the ability to make gooddecisions. His claim is that the overlap between these abilities is much lower than most people think.

7. Beware of behavioral biases (minimizing constraints to good thinking).

6. Update your views effectively (beliefs are hypotheses to be tested, not treasures to beprotected).20 Most people prefer to maintain consistent beliefs over time, even when the facts reveal theirbeliefs to be wrong.  But great investors do two things that most of us do not. They seek information or views that are different than their own and... See more