Temperament Matters

Success in investing doesn’t correlate with IQ. Once you have ordinary intelligence, what you need is the temperament to control the urges that get people into trouble in investing.

Warren Buffett

Mr Buffett couldn’t be more right! Before l started investing, I thought all the jargon made the pundits sound intelligent, like investing was only for the high IQ’s of the world. The more I read, the more I realised how skewed this thinking was.

It’s temperament, patience, the ability to react with equanimity to a large drawdown in markets and be more philosophical about the whole situation. I can’t stress enough how important these skills are.

To not follow the crowd, shut out the noise and think independently while trying not to let our emotions direct our investment decisions is a huge advantage.

The one thing from reading history and about the people that have gone before us, that is still true to this day, as it was back then and will forever be true…

Is human behaviour.

We don’t change, we all feel the same emotions people felt 50 or 100 or 300 years ago.

We only need to look at previous crashes in the stock market and see this as a helpful tool to understand that emotions are what drives us to be irrational in our behaviour. Whether it’s a market crash now or in 1907, we’ll still behave the same collectively.

Viewing short term market fluctuations and volatility as just noise and more importantly a buying opportunity can do wonders for your portfolio in the long run. Trying to think of it like your favourite investments just went on sale can help a lot in sticking to our long term investment plans.

Be patient, time carries most of the weight.

J.H.Repetto