Reflections on the Ten Attributes of Great Investors

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

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).

5. Think probabilistically (there are few sure things).

one concept that  is close to immutable for an investor is that the present value of future free cash flow determines the value  of a financial asset. This is true for stocks, bonds, and real estate. Valuation is challenging for equity  investors because each driver of value—cash flows, timing, and risk—are based on expectations wher... See more

Making money in markets requires having a point of view that is different than what the current pricesuggests. Michael Steinhardt called this a “variant perception.”13 Most investors fail to distinguish betweenfundamentals and expectations. When fundamentals are good they want to buy and when they are poorthey want to sell. But great investors alwa... See more

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.

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.