Skills That Separate You as an Investment Manager: Introspection

While I have written advice on how to become a research analyst before, I have not talked about the skills that truly separate you from the crowd once you have your coveted research analyst position. Having hired research analyst interns, research analysts, a portfolio manager, and even my own successor when I retired from investment management in 2005, I have gained a fair amount of knowledge about which skills separate you as an investment manager. Subsequently I will be publishing a monthly column to discuss some of these important skills.

Some of the skills most investment managers look for are obvious: a love of economics, business, and finance; vast knowledge of the preceding; high drive; confidence; persistence; and so forth. You probably recognize these skills as necessary as they permeate the mythology of the investment business. Yet, many of the skills needed for a successful investment management career are not taught in business schools. Neither are these critical skills discussed in the business press. Nor are they understood by most firms doing the hiring. And it is on these skills that I intend to focus.

If you would like to separate yourself from the crowd of highly motivated and highly intelligent candidates, try adding the following to your arsenal of skills: introspection.

Self-Knowledge/Introspection

If you do not have self-knowledge about yourself then you cannot know which of your weaknesses need to be addressed with personal forgiveness, thoughtfulness, a well-crafted plan, and discipline. Consequently you are doomed to repeat your mistakes over and over. Few fund management firms have patience for damaging mistakes being repeated. In fact, in my career it was my personal goal to never repeat the same mistake twice. I am happy to say that while I made many mistakes in my investment career, I only repeated one of my mistakes.

Furthermore, if you do not know yourself, then your intellectual tools are likely to be out of accord with your innate talents. For example, if you objectively perform best when your adrenaline is coursing through your veins and critical decisions need to be made immediately, then it makes little sense for you to deploy tools like deliberate financial statement analysis and discounted cash flow analysis. Perhaps the better match for your toolkit is a piece of software that helps you comb Twitter for actionable information. It should be obvious that knowing this about yourself would mean you likely want to work on a trading desk, as opposed to at a value investment shop.

Remedy

Take up practicing meditation or mindfulness. When you start practicing meditation, you are gaining a skill set that humanity has found useful for over 3,000 years to get to know yourself. For more on how meditation can benefit financial professionals, watch the video below.

Application

My very first purchase as a portfolio manager was International Rectifier (IRF). This was a company that I had spent months trying to understand and model, and I bought shares in the company shortly after my promotion to the role of portfolio manager from research analyst. My model suggested fair value for the company was $45 conservatively, and the market price at the time was right around $45. International Rectifier proceeded to trade far down from my estimate of fair value.

It was not until I engaged in careful introspection that I realized I had ignored my preferred rule of only buying an investment in which there was a margin of safety (i.e., current price at least 15% below my fair value estimate) in a business’ share price. Unfortunately, I could not wait to make an imprint on the fund I was promoted to co-manage. Engaging in meditation ahead of time would have prevented the loss of capital endured by the fund’s shareholders.

If you’re interested in meditation, join the LinkedIn CFA Institute Members Meditation Group [Note: you must be a member of CFA Institute to join].

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All posts are the opinion of the author. As such, they should not be construed as investment advice, nor do the opinions expressed necessarily reflect the views of CFA Institute or the author's employer.

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