After many years working with hundreds of investors, I’m firmly convinced that [a correlation between investor personalities and investment success] exists! For example, skeptics don’t make very successful investors—at least not in my experience. Skeptics essentially won’t buy an investment unless it seems like a sure thing. The problem is that by the time a skeptic feels confident with a given investment, so does everyone else. By that time, all this confidence is built into a high stock price, and the investment isn’t a bargain. In fact, given the market’s history of extremes of optimism and pessimism, often times the skeptic’s purchases are over-priced. As a group, skeptics tend not to have a good grasp of the concept of risk…Successful investors have their share of home runs, but (like a good baseball player) they focus more on making solid investments (hits) than emotionally going for glory.
Dec 1992