- Intelligence and hard work can be bad for investors; what we need instead is resilience.
- Not all of us have the qualities required to be good stock pickers, but we can prevent ourselves suffering because of this lack.
What qualities do we need to be good investors? We can, beyond a certain level, discount intelligence. “To be a great investor you don’t have to have a terrific IQ” Warren Buffett has said. “What you do need is the right temperament.” In fact, intellect can be a liability as it can generate an overconfidence about our ability to pick stocks and funds and hence cause us to trade too much, buy high-charging funds or over invest in risky assets.
Instead, recent research shows that investors need something else – grit, or the ability to keep going during bad times. The University of Kansas’s William Bazley and colleagues have found that resilient people make more money on stock markets than others, even controlling for such determinants of returns as age, education and financial literacy.