(20-12-2013, 10:03 AM)specuvestor Wrote: [ -> ]Bull markets can last very long... you have to know yourself if you can withstand being mocked 
IIRC Buffett was skeptical of dot com as early as 96 and was mocked repeatedly in 1999 and early 2000. He was holding high cash all the way.
Buffett has shared most of his investment secrets. The problem is whether we have the tenacity and aptitude which cannot be studied.
i agree completely.
i have shared this article on some other blog. Some of you may have read it or come across. but i think it's still worth to be shared here again.
Reading this won’t make you great
What makes someone a great investor? It’s something you have to be born with, said
Mark Sellers.
Apparently, it’s not about your IQ, the education you have had, the books you have read, or the experience you’ve accumulated. “If it’s experience, then all the great money managers would have their best years in their 60s and 70s and 80s, and we all know that’s not true,” he said in a speech to a class of Harvard MBA students.
Intelligence and learning are obviously necessary too, and are sources of competitive advantage for an investor, but
there are structural assets some possess that cannot be copied or learnt by others. “They have to do with psychology and psychology is hard wired into your brain. It’s part of you. You can’t do much to change it even you have a lot of books on the subjects,” said Mr. Sellers.
He said that there are 7 traits great investor share that are true sources of advantage because they cannot be learned. You are either born with them or you aren’t. (Is it true or not?)
The seven traits are:
1. The ability to buy stocks while others are panicking, and the ability to sell at a time when other investors are euphoric.
“Everyone thinks they can do this, but then when October 19, 1987, comes around and the market is crashing all around you, almost no one has the stomach to buy,” Mr. Sellers said. “When the year 1999 comes around and the market is going up almost every day, you can’t bring yourself to sell, because if you do, you may fall far behind your peers.
“The vast majorities of people who manage money have MBAs and high IQs and have read a lot of books. By late 1999, all these people knew with great certainty that stocks were overvalued, and yet they couldn’t bring themselves to take money off the table because of the ‘institutional imperative’, as Buffett calls it.
2. The great investor has to be obsessive about playing the game and wanting to win.
“These people don’t just enjoy investing: they live it. They wake up in the morning and the first thing they think about, while they are still half asleep, is a stock they have been researching, or one of the stocks they are thinking about selling, or what the greatest risk to their portfolio is and how they are going to neutralize that risk.
Their head is always in the clouds, dreaming about stocks. Unfortunately, you can’t learn to be obsessive about something. You either are, or you aren’t. And if you aren’t, you can’t be the next (want to be) ‘Buffett’.
3. The willingness to learn from past mistakes.
“The thing that is so hard for people and what sets some investors apart is an intense desire to learn from their own mistakes so they can avoid repeating them. Most people would rather just move on and ignore the dumb things they have done in the past.
I believe the term for this is ‘repression’. But if you ignore mistakes without fully analyzing them, you will undoubtedly make a similar mistake later in your career. And in fact, even if you do analyse them it’s tough to avoid repeating the same mistake.
4. The fourth trait is an inherent sense of risks based on common sense.
“Most people know the story of long Term capital Management, where a team of 60 or 70 PhDs (inclusive of a few Nobel prize winners) with sophisticated risks models failed to realized what, in retrospect, seemed so obvious: they were dramatically overleveraged. They never stepped and said to themselves, ‘Hey, even the computer says this is OK, does it really make sense in real life.
“The ability to do this is not as prevalent in human beings as you might think. I believe the greatest risk control is common sense, but people fall into the habit of sleeping well at night because the computer says they should. They ignore common sense, a mistake I see repeated over and over in the investment world.”
5. Great investors have confidence in their own convictions and stick with them, even when facing criticism.
“Buffett never get into dotcom mania, though he was being criticized publicly for ignoring technology stocks. He stuck to his guns when everyone else was abandoning the value investing ship and Barron’s was publishing a picture of him on the cover with the headline ‘What’s Wrong, Warren?’ Of course, it worked out brilliantly for him and made Barron’s look like a perfect contrary indicator.”
6. It is important to have both sides of your brain working, not just the left sides. – The side that is good at math and organization.
In business school, I met a lot of people who were incredibly smart. But those who were majoring in finance couldn’t write worth a damn and had a hard time coming up with inventive ways to look at a problems,” said Mr. Sellers.
“I was a little shocked at this. I later learned that some really smart people have only one side of their brain working, and that is enough to do very well in the world but not enough to be an entrepreneurial investor who thinks differently from the masses.”
“On the other hand, if the right side of your brain is dominant, you probably loathe math and therefore you don’t often find these people in the world of finance to begin with.”
So finance people tend to be very left-brain oriented – and Mr. Sellers said that that is a problem. A great investor needs to have both sides turn on. He said. “As an investor, you need to perform calculations and have a logical investment thesis. This is your left brain working. But you also need to be able to do things such as judging a management team from subtle cues they give off.
You need to be able to step back and take a big picture view of certain situations rather than analyzing them to death. You need to have a sense of humour and humility and a common sense. And most important, I believe you need to be a good writer.”
He cited Warren Buffett as one of the best writers in the business world. “It’s not a coincidence that he is also one of the best investor of all time.
If you can’t write clearly, it is my opinion that you don’t think very clearly,” Mr. Sellers said.
7. And finally the most important, and rarest, trait of all: the ability to live through volatility without changing your investment thought process.
(I, believe you can perform No. 1 only if you have No. 7.)
This, said Mr. Sellers, is almost impossible for most people to do; when the chips are down they have a terrible time not selling their stocks at a loss. They have really a hard time getting themselves to average down or to put any money into stocks at all when the market is going down.
“People don’t like short-term pain even if it would result in better long-term results,” he said. Very few investors can handle the volatility required for high portfolio returns. They equate short-term volatility with risk.
This is irrational; risk means that if you are wrong about a bet you make, you lose money. A swing up or down over a relatively short period is not a loss and therefore not risk, unless you are prone to panicking at the bottom and locking in the loss.
“But most people just can’t see it that way; their brains won’t let them. Their panic instinct steps in and shuts down the normal brain function.”
