Doctors and engineers are notoriously the worst at investing.
They’re generally “too smart” for their own good.
More to the point, they make the mistake of assuming high intelligence translates into investing success.
Doctors tend to be studious overachievers. They’re “book smart,” having spent between 11 and 16 years studying medicine. Once practicing, they have enough disposable income to invest… and they assume the path to investment success is similar to the one that got them their “M.D.” – be smart, study hard, and just “learn” how to do it.
Engineers have the same afflictions, plus one more – a strong belief that financial markets work just like circuit boards, or suspension bridges. And they figure once they “crack the code,” or “work out the math,” they’ll be on their way to manufacturing money, just as mechanically as a printing press spits out Wall Street Journals every morning.
Both doctors and engineers overestimate the value of their high IQ, when it comes to investing.
They also underestimate the value of emotional intelligence – which is, simply, the ability to identify and manage one’s own emotions.
I can’t tell you how many angry phone calls I got from doctors when I worked on the trade desk of a brokerage firm in the mid-2000s. I knew they were doctors because they’d tell me as much.
They’d give me an expletive-laced earful about a “bad fill” they thought we gave them, which was completely responsible for their “tanked” trade (even though they were responsible for making the trade).
It was always something like…
“Do you realize I’m the head of surgery at XYZ hospital and I’ve got a seven-figure account with you f***ing idiots?!”
“OK,” I would think to myself, “good for you.”
But what does your IQ, or M.D., have to do with investing?!
Look, I don’t mean to pick on doctors and engineers. They just help me make my point easily, and that is: you don’t need a high IQ to be an extraordinarily successful investor.
In fact, you’re probably better off with an average IQ and the healthy measure of humility that comes with mediocrity.
And I swear… if you can just control your emotions, you’ll be a far better investor than every high-IQ, overachieving ego-maniac out there!
Consider what Warren Buffett has said about intelligence and investing [my emphasis added]:
“You don’t need to be a rocket scientist. Investing is not a game where the guy with the 160 IQ beats the guys with the 130 IQ.
You do have to have an emotional stability and an inner peace about your decisions. It’s a game where you’re bombarded by minute-by- minute options.
It’s not a complicated game. It’s simple, but it’s not easy.
You have to have an emotional stability.”
Well said, Mr. Buffett!
So if we can agree you don’t need a high IQ to be a killer investor… what do you need?
You Need These Two Things
A proven systematic strategy and an ounce of discipline (aka Buffett’s “emotional stability”) are the only two things you need to be an extraordinarily successful investor.
The beta-testers of my newest research trading service know this well. Since last December, they’ve been following the systematic buy and sell signals of my market-timing model, which is designed to profit from volatility booms and busts. And they’ve been following it with discipline.
I have to admit… I got the idea for this project from an experiment done in the early 1980s.
Have you heard of the “Turtle Traders,” who proved that all you need to be successful at investing is a system and discipline?
In 1983, two wealthy commodity traders disagreed over what it takes to be a successful investor.
One thought trading greatness was innate –you were either born with it, or you weren’t.
And I suspect he thought intelligence was the key, “God-given” ingredient.
The other trader thought it was possible to teach an average person how to be a great trader… that success depended as much on “nurture,” as “nature,” so to speak.
The two men decided to settle their debate with a real-world experiment. They placed an ad in the paper inviting anyone who was interested to apply for a program, in which the two successful traders would “teach” the novices how to trade.
The ad said, “No experience necessary” and instructed applicants to simply write “one sentence giving their reasons for applying.” There were no IQ tests involved.
Long story short: the novice traders were given a system, with very specific buy and sell rules. The ones who followed it with discipline made a boat-load of money.
Truly, these were everyday people… with average IQs… with no trading experience.
They were given rules to follow… telling them when to buy and when to sell… and all they had to do was follow the rules!
Within a year, they were extremely wealthy traders!
Now, here’s the final thought I want to leave you with today…
You may never be the “smartest guy in the room” if you’re a systematic investor. Well, at least you won’t sound like it.
Society somehow perpetuates this notion that successful investors are wicked-smart and “in the know.”
They’re the guys at the cocktail party who yammer on about interest rates and the yield curve… who always have a hot “tip” on a stock, since they rub shoulders with CEOs at the gym… who sound as if they wrote this morning’s Wall Street Journal, or last week’s Financial Times.
Investors who follow a system with discipline can’t “talk that talk.” We rarely get invited onto CNBC. And we have to learn to deal with the awkwardness that ensues when a friend of a family member asks that obvious conversation-starter, knowing you’re “into investments” – So, what’s the market gonna do this year?
“Hell if I know!” is my answer.
You see, systematic investors are humble enough to know what we don’t know. We embrace uncertainty, rather than ignore it. We don’t try to predict the future.
And we sure as anything don’t hold ourselves out as “know-it- all’s!”
At some point, all successful investors ask themselves a poignant question:
“Do I want to make money? Or, do I want to sound smart?”
If you answered “make money,” then I highly recommend you join me on Monday for an exclusive special event I’m holding for Dent Research readers.
Like the “Turtle Traders” ad, I’m inviting a small group of readers to join me in a project I’ve been working on for over two years now.
My goal with it is simple: turn everyday folks into extraordinarily successful investing machines.
I’ll be sharing the entire set of “rules” of my strategy – giving you every single buy and sell signal. And I’m committing to being your investing “mentor,” helping you develop the discipline needed to trade the system and win big.
Naturally, spots are limited for this opportunity – go here now to reserve your “seat” for free.
Editor, Project V
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