What are the qualities of an Intelligent Investor?
Great fortunes are not made in the stock market just by identifying great opportunities them but rather holding them in our portfolio for a very long time. Many investors think that just by identifying good investments in the stock market we can become rich but the wealth equation is still incomplete. Holding them for the long term in our portfolio is a crucial part of the wealth equation which most of the investors forget. Every investor dream of identifying the next 100-bagger in the market. Identifying multi-bagger is not a difficult task but investors must develop three qualities in order to find the next multi-bagger.
The role of time and patience in finding and holding multi-bagger is immense. Thomas Phelps in his book 100 to 1 says that investors must need only three qualities to find multi-baggers.
Vision to see them
All great investors are great visionaries. They are able to see the future far beyond a normal person. If one has to become rich in their investing journey, we have to look into the places where everyone is not looking and also, we must have the vision to see the future potential payoff in investments we make. Having a solid and insightful vision of investing is not easy to develop. It takes lots of experiences and learnings from mistakes to become a great visionary. For example, now we all know that Coca-Cola is a great business but it was during the period of 1987 when Warren Buffet bought the stocks of Coca-Cola. But why did he buy Coca-Cola? A simple answer is, he was visionary. He was able to have a great long-term vision which helped him to see the future potential of the company.
How to develop long term vision
Most of the investors buy a good company but once the stock prices rise 20-30%, most of the investors sell their entire shares, thinking that they have made profitable investments. But in reality, they have not. Investors must not buy stocks thinking that, if it rises 20-30%, one would sell. But rather investors must have the vision to see the future potential of our investments growing to 5x or 10x. It means that we should invest only in companies where we think that, the company will grow 10x or 20x from the current situation. Investors must see the big picture. Big money is made only by seeing the big picture and to see the big picture we have to be a great visionary.
Courage to buy them
Courage is the most underrated trait in the investing field. When investors find new investments that have got great future potential must have the courage to buy them. There are many investors who say that they knew exactly which company is going to grow faster but they might not go and buy those stocks because they lack courage. Investors should have the courage to seize the opportunity in the markets. Investors must always keep in mind that, markets don’t give opportunities every day, so if one finds an opportunity, one must have the courage to act upon it.
Patience to hold them
Fortunes in the market are not created overnight. The market may take many years than we think to give proper reward for our investments. Investors who have extraordinary vision and courage to buy stocks may sometimes lack patience. Patience is the rarest among all the investors. Everyone wants immediate results because they lack patience.
Lack of patience may lead investors to deep financial trouble. Patience is the fortune teller. Great fortune goes to people who are more patient than others.
Many investors feel frustrated or depressed when they see that, the stock prices have not moved anywhere in the last two years, even though the company is fundamentally performing well. At that time, many people sell their shares and walk away. But an intelligent investor knows that as far the company is fundamentally strong, one must not sell the shares. An intelligent investor has more patience than others.