Mobius – Building blocks for good investing

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The post below is a guest contribution by Mark Mobius, Templeton Asset Management’s emerging markets guru.

One of my blog readers is a young university graduate from Hong Kong, who wants to pursue finance and investment as a career. He asked me: “What should I do if I really really want to work in the financial industry? What are the most essential qualities for a young man to succeed in the financial world? Do you have any advice?”

In emerging markets investment, I believe it is necessary to be optimistic. While one can certainly learn numerous technical skills that help in making investments or managing a portfolio, a large percentage of investing is still psychological. Both buyers and sellers act on a combination of instinct, information and logic. The development of certain personal characteristics could play a key role in contributing to your investment success.

Hard work and discipline
Someone asked me once if I could condense into five words the most important qualities needed for a good investor and I replied: “Motivation, humility, hard work and discipline.” It stands to reason that the more time and effort that is put into researching investments, the more knowledge that will be gained and wiser decisions made.

Humility is needed so you are able and willing to ask questions. If you think you know all the answers you probably don’t even know the questions. As Sir John Templeton once said, “If we become increasingly humble about how little we know, we may be more eager to search.”

Common sense
To me, common sense is most important when making investment decisions, since the words “common sense” imply the clarity and simplification required to successfully integrate all the complex information with which investors are faced.

I think a significant amount of creativity is required for successful investing, since it is necessary to look at investments from a multifaceted approach, considering all the variables that could negatively or positively affect an investment. Also, creative thinking is required to look forward to the future and try to forecast the outcome of current business plans.

A number of successful investors have commented on the importance of independent and individual decision-making. If one buys the same securities as everybody else, one ends up with the same results as others. In my opinion, it is impossible to produce superior results unless one does something different from the majority.

It is important for investors to be flexible and not permanently adopt a particular type of asset. I think the best approach is to migrate from the popular to the unpopular securities or sectors. Flexibility is also an attribute that keeps one from holding on to a stock out of loyalty – flexibility allows one to change as times change and as new opportunities present themselves.

These are the key personal qualities that I’ve identified as affecting investment-making decisions. If you can adopt and integrate these investment approaches into your decision-making process, I believe you could significantly improve your chances of success in investing, especially in emerging markets. I’ll leave you with a quote from Sir John Templeton, from whom I learned so much about investing: “Tell your readers to use it or lose it. If you don’t use your muscles, they get weak. If you don’t use your mind, it begins to fail.”

Source: Mark Mobius, Investment Adventures in Emerging Markets, February 18, 2010.

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1 comment to Mobius – Building blocks for good investing

  • Russ Trimble

    I have trouble with logic and the stock market. Examples: French refineries shut down on strike that should decrease crude demand but crude prices go up and the analysts think this is logical. Bernanke says he has to keep interest rates low for extended period to time and the market bounds up. What he is saying is that the economy stinks so much that it is on life support and not functioning on its own so why should I be betting on businesses that are going out of business without blood transfusions? The day to day movements seem to defy logic to me.

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