Ron Muhlenkamp: 3 Traits You Need To Be A Successful Investor

In his recent interview on Value Investing Live, Ron Muhlenkamp discussed the three traits every investor needs to be successful in investing. Here’s an excerpt from the interview:

Muhlenkamp: There’s three things that are required to make money in the investment markets.

One is a consistent philosophy, and I’ve tried to give you a little bit of mine but for some people it’s growth, for some people it’s market trading, for some people it’s value, but you need a consistent philosophy.

Then you need a sense of perspective that says no matter how good my philosophy is there will be periods of time when it doesn’t appear to be working. Coming out of 2000 when all the dot-coms ran we weren’t in the dot coms but we were in things that looked like values to us. But as long as the dot-coms were running all the money flowed that way.

Once they started falling off one by one they came and found things like our housing stocks which were totally ignored. I think the dot com sucked money out of the rest of the marketplace.

In the ’68 peak, the S&P peaked in ’68, and then the smaller things started falling off. The Nifty-50 didn’t peak until ’72, four years later, but by that time if you were only watching the Nifty-50 you still thought in ’72 you were in a bull market, and it surprised the hell out of you when one company had a down quarter and the whole group got hit.

They didn’t mind when they all ran up together but… I had a boss at the time who was tracking that and he says they stubbed their toe. I said yes they had one down quarter, the company stubbed his toe but the stock’s down 30%. The investors broke both legs and the market has a nice way of exaggerating both the upside and the downside those little differences that are the difference between a stubbed toe and a broken leg.

So you need a consistent philosophy, you need a sense of perspective that says it doesn’t always work, and then you need to discipline, and none of us ever win the game of the discipline, that’s a new game every day regardless of the other stuff.

You can watch the entire interview here: