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 behaviour 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

The Curse of Intelligence (here)

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)

image credit to cnbctv18.com

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, the 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 “behavioural or psychology “ impact on investment in My Investment Strategy ( here )

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

Cheers !!

Quote Of The Day :

“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