Your IQ and ROI



According to Warren Buffett "Investing is not a game where the guy with a 160 IQ beats the guy with a 130 IQ" and what Buffett says about what is necessary for investing successfully: 

Temperament is also important. Independent thinking, emotional stability, and a keen understanding of both human and institutional behavior is vital to long-term investment success. I’ve seen a lot of very smart people who have lacked these virtues.

Also, investing is simple, but not easy. It requires independent thinking and emotional intelligence more than IQ. When markets are tumbling and fall like no tomorrow, IQ is not going to help you to stay away from selling and buy even more at most bargaining prices.


Below is one of the best article written about “Intelligence and Investment “ from awealthofcommonsense.com

Here are some of the highlight from the article : “After a few years of being impressed by the sophistication and above average IQ of the various portfolio managers, strategists, analysts, and marketing people I came into contact with, I finally had a realization – intelligence can only take you so far in this world. I didn’t exactly have an epiphany on the topic, but over time the shine began to wear off.
It became apparent that the smartest person in the room isn’t always right. In fact, most of the time their intelligence works against them because they’ve become so sure of themselves and their investing abilities that they’re unable to change their mind or accept the fact that the markets don’t care what your IQ is.
Some of the smartest people outside the world of finance can also be terrible investors..
Why?
Because they assume success or wealth in one arena (their job) will easily translate into another (the markets). Smart people are often the most dangerous in terms of poor decision-making ability because they tend to be overconfident, make things too complex, and over-think things.”


One of the strongest verdict :

Isaac Newton was a genius, but even he lost millions in the stock market (here)





IQ may be useful when it comes to analyzing complicated investments. However, patience, discipline and perspective are all more closely-tied to EQ than IQ.


Sometimes it doesn't matter how much complex quantitative analysis you perform on a stock or how good one could predict the cash flow or growth of a company. At the end of the day, share price is determined by the market, not by a number that a supercomputer or complex algorithm. 

If high intelligence were the key to successful investing, top business school professors and economists would be the wealthiest guys on the planet.

Obviously, financial markets are made up of millions of people around the world. Understanding how other investors are feeling, identifying why they are buying and selling and anticipating what they will be doing next all involve emotional intelligence. You may find out more about the importance of “ behavioral or psychology “ impact on investment in My Investment Strategy ( here )

But how many investors will dare to buy during crisis ? as what repeatedly emphasized and highlighted by Buffett Be Fearful When Others Are Greedy and Greedy When Others Are Fearful”


Cheers !!




“Our A students become professors. Our B students go to law school. Our C students rule the world.”
Henry Rosovsky, Former Dean of Harvard College

Comments

  1. Hi STE,

    There is no relation with IQ and ROI. Pretty much from analysing or doing 'homework' with our IQ, it improves our confidence but it does not signify that our investments will go as per intended. All about probability than certainty.

    While there is a indirect relation with EQ and ROI.
    The common words - Sell in fear, buy in greed :)

    I'm still very amazed by your portfolio updates and enjoying reading them silently and you're indeed a good role model. Time after time, I'd love to drop by to your guest post on AK's blog on your inspiring story to motivate myself :)

    ReplyDelete
    Replies
    1. Hi sleepydevil,
      Thanks for the comments and compliment , It really encourage me to share and write more about my journey of stocks investing...
      Yes , indeed , as you said , the return on investment is about "probability than certainty " ,but in most of the case , investors like " certainty" , they wanted to know the market's return in next year , company's revenue growth , which counter will beat the market etc... they always like to listen to forecast or projection from the so call " Gurus " ...
      Of course , some times , we need a little bit of luck in getting " alpha" .. like the sectors we are investing and right timing to buy ...
      I like you latest latest blog post on topic of " cpf " ...yes , cpf can be a very good "tool" to assist us in our "retirement planning " ,, if use it wisely and not to over commit to "expensive " housing " ....always remember to "live within our means "

      Cheers !!

      Delete
  2. Nice Blog!
    Thanks For Sharing Stockmarket update for more visit us at
    Capitalheight

    ReplyDelete

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