Jordan Belfort - the 'Wolf of Wall Street' - at this week's Melbourne Cup. Photo: Eddie Jim
IT HAS always irked me that books with titles like How to make a million dollars in the stockmarket before lunch time probably sell more copies than my book. It's my own fault, Stockmarket Secrets is hardly exciting by comparison and, let's be honest, if they were really "secrets" well, they're not any more.
But the get-rich-quick books do sell, presumably because there are a lot of financially desperate, unrealistic and probably poor people buying books and if you think about it, in a sort of catch-22 for get-rich-quick books, anyone buying that sort of book probably shouldn't be responsible for money because financially desperate, unrealistic and poor are hardly the right personality traits for a successful fund manager and, when it comes to investment success, personality is everything.
Give a hundred people $100,000 and come back in five years' time and I can guarantee that apart from the people with zero and those with exactly $100,000 still, there will be no two investors with exactly the same sum of money.
The reason, of course, is that investment outcomes are not a function of method or approach but a reflection of personality. It doesn't matter whether we all adopt the ''intrinsic value'' approach, or trade on Gann principles or candles, because every single one of us is unique and each of us is going to experience our own ''special'' outcome -even twins. Because our success or failure is wholly dependent on personality, there are as many investment outcomes as there are investors.
Thus, great tomes are written about "the psychology of investing" and one of my favourites is a book entitled just that, by Colin Nicholson, in which he breaks down investors into general personality traits and in so doing asks us to assess our own suitability to the investment game. It is all about how you handle uncertainty, or more obviously, risk.
He says people come in three general temperaments, each with two extremes including "Unpleasant" or "Pleasant", "Arousable" or "Unarousable", "Submissive" or "Dominant" and the eight various combinations of those three pigeonhole investors as Exuberant, Dependent, Relaxed, Docile, Hostile, Anxious, Disdainful or Bored.
Turns out the Relaxed (pleasant, unarousable and dominant) and the Docile (pleasant, unarousable and submissive) are the most suited to investment success and the rest, anyone unpleasant or arousable, are at a disadvantage.
Armed with this information you now have to take a good hard look at yourself and, for that matter, your adviser. Are they aggressive or docile, pleasant or unpleasant, dominant or submissive because, odd as it is, the traditional image of a successful "Wolf of Wall Street" "Bud Fox" type-A broker displays all the personality traits of an investment failure because aggressive and unpleasant is bad, or in the words of the Desiderata, beware loud and aggressive people, they are vexatious to the spirit - and the bank balance.
All that shouting, swearing, phone-slamming, belligerence and egotistical crudeness is not, contrary to Hollywood, the sort of personality traits you want in a broker.
You want someone laid-back, reliable, emotionally stable, cool under pressure, someone with that Dunkirk spirit, the sort of person that goes to the running of the Pamplona bulls and walks. Someone that is pleasant without being obsequious, agreeable without being subservient and decisive without being overbearing.
Fortunately, this also describes the bulk of those patient long-term investors that form the core of most full-service broker's client bases because pleasant and patient people are psychologically suited to the sharemarket.
In which case, even if there has been a disturbance in the force, such as the global financial crisis, you are probably going to be better off retaining your pleasant and patient temperament rather than attempting something radical and new. Being pleasant and patient may not have worked well in a bear market, but becoming loud and aggressive will accomplish even less.
So don't change, all you nice and pleasant clients out there. Your odds are much better if you can stay just the way you are.
Marcus Padley is a stockbroker with Patersons Securities and the author of sharemarket newsletter Marcus Today. For a free trial, go to marcustoday.com.au - his views do not necessarily reflect the views of Patersons.
