In all professional endeavors, one can identify certain traits that virtually all successful practitioners possess. In golf, the greatest golfers -- Bobby Jones, Sam Snead, Gary Player, Jack Nicklaus, Phil Mickelson and Tiger Woods -- all had world class short games. The greatest entrepreneurs have one undeniable trait in common -- they are fanatics about their craft. Apparently for the first 10 to 20 years that Bill Gates was running Microsoft (MSFT), he didn't take a single vacation.
The best-of-the-best investors also share a few similar behaviors, and anyone wanting a lengthy market-beating track record should try to develop these qualities as well. Let's identify what I believe are the top three.
The first is patience. The best investors on the planet have an uncanny ability to wait as long as necessary for the right opportunities to surface. Short-term market volatility can be frustrating and painful to impatient investors. The patient investor, however, will wait as long as it takes -- years if necessary -- before making any significant investments. Very few investors can truly be as patient.
The second trait is the ability to ignore the crowd and believe in your convictions. This ability to go it alone is very hard for 95% of investors. Often times, the best investors are making a wager that is out of favor and thus underperforming the market while others are reaping the benefits of the market's short-term advances. Perhaps the best example of this was in 1999 when Barron's ran a cover story opining that Warren Buffett had lost his touch. While others were enjoying bubble-type gains from the Internet mania, Buffett's Berkshire Hathaway (BRK.A) shares had lagged the market for years. Today, we know what resulted from Buffett's patience.
Finally, great investors will bet big, incredibly big, when they have the conviction of a great investment idea. At the peak of the financial crisis, Charlie Munger, Chairman of the Daily Journal (DJCO), invested nearly all of the company's investable assets into Wells Fargo (WFC) when WFC shares were trading for less than $10 per share. Such a big wager -- virtually outlawed in investment management -- has returned over 400% vs. 200% for the overall market. (Wells Fargo is currently the largest holding in Jim Cramer's charitable trust, Action Alerts PLUS, representing about 6.5% of the portfolio.)
The blueprint to successful investing is a simple one, but it's not easy to follow because most investors are chasing immediate gratification. Nevertheless, it's not impossible to become an accomplished player if you commit to practicing it correctly.