Skills That Separate You as an Investment Manager: Introspection
While I have written advice on how to become a research analyst before, I have not talked about the skills that truly separate you from the crowd once you have your coveted research analyst position. Having hired research analyst interns, research analysts, a portfolio manager, and even my own successor when I retired from investment management in 2005, I have gained a fair amount of knowledge about which skills separate you as an investment manager. Subsequently I will be publishing a monthly column to discuss some of these important skills.
Some of the skills most investment managers look for are obvious: a love of economics, business, and finance; vast knowledge of the preceding; high drive; confidence; persistence; and so forth. You probably recognize these skills as necessary as they permeate the mythology of the investment business. Yet, many of the skills needed for a successful investment management career are not taught in business schools. Neither are these critical skills discussed in the business press. Nor are they understood by most firms doing the hiring. And it is on these skills that I intend to focus.
If you would like to separate yourself from the crowd of highly motivated and highly intelligent candidates, try adding the following to your arsenal of skills: introspection.
If you do not have self-knowledge about yourself then you cannot know which of your weaknesses need to be addressed with personal forgiveness, thoughtfulness, a well-crafted plan, and discipline. Consequently you are doomed to repeat your mistakes over and over. Few fund management firms have patience for damaging mistakes being repeated. In fact, in my career it was my personal goal to never repeat the same mistake twice. I am happy to say that while I made many mistakes in my investment career, I only repeated one of my mistakes.
Furthermore, if you do not know yourself, then your intellectual tools are likely to be out of accord with your innate talents. For example, if you objectively perform best when your adrenaline is coursing through your veins and critical decisions need to be made immediately, then it makes little sense for you to deploy tools like deliberate financial statement analysis and discounted cash flow analysis. Perhaps the better match for your toolkit is a piece of software that helps you comb Twitter for actionable information. It should be obvious that knowing this about yourself would mean you likely want to work on a trading desk, as opposed to at a value investment shop.
Take up practicing meditation or mindfulness. When you start practicing meditation, you are gaining a skill set that humanity has found useful for over 3,000 years to get to know yourself. For more on how meditation can benefit financial professionals, watch the video below.
My very first purchase as a portfolio manager was International Rectifier (IRF). This was a company that I had spent months trying to understand and model, and I bought shares in the company shortly after my promotion to the role of portfolio manager from research analyst. My model suggested fair value for the company was $45 conservatively, and the market price at the time was right around $45. International Rectifier proceeded to trade far down from my estimate of fair value.
It was not until I engaged in careful introspection that I realized I had ignored my preferred rule of only buying an investment in which there was a margin of safety (i.e., current price at least 15% below my fair value estimate) in a business’ share price. Unfortunately, I could not wait to make an imprint on the fund I was promoted to co-manage. Engaging in meditation ahead of time would have prevented the loss of capital endured by the fund’s shareholders.
If you’re interested in meditation, join the LinkedIn CFA Institute Members Meditation Group [Note: you must be a member of CFA Institute to join].
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All posts are the opinion of the author. As such, they should not be construed as investment advice, nor do the opinions expressed necessarily reflect the views of CFA Institute or the author’s employer.
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34 thoughts on “Skills That Separate You as an Investment Manager: Introspection”
Excellent article Jason as usual. I think there are at least two attributes to be considered:
1) A healthy skepticism as part of one’s nature
2) A character which shows obsessive compulsive traits; not to the point of pathology but a certain orderliness and thoroughness which is required in all professions.
Laurence Brody, M. D.
Applied Behavioral Finance Group
CFA Society of Los Angeles
Thank you for both your feedback and your discussion of additional skills. I know that our audience and I both appreciate them! This post is to be the first of an ongoing monthly column to be published the second Monday of every month. So some of the skills you imagining as important
may be on that list, too : ) I have written the first six of these pieces, so the die is cast at least until October.
this may be worth reviewing
Thank you for the link. I am certain that readers will take much from the piece you linked to above.
Wonderful article Jason. I liked the bit about knowing oneself to understand where one’s efforts would yield the best results.
Keep up the insightful work!
Your feedback made me smile – thanks for taking the time to share your thoughts with me and others.
Liked your article jason
Thanks for letting me know. Was there anything, in particular, that you liked?
Worth reading article i must say, this will really help in advancing and boosting the career and get the positive out of it as an analyst.
I am so glad that you think so! This is exactly what I hope to do with the new series of posts on skills for portfolio managers.
Best wishes for success!
Interesting, as always. Thanks for sharing.
I find the healthy skepticism part interesting. As a junior analyst, I find that working with a manager that ‘tolerates’ and almost encourages skepticism really helps to develop that side of your personality.
It’s nice to be able to question the norm, if you are allowed the freedom of speech to do so.
How nice to read your comments and praise. Thank you for sharing with me. Thank you the most for your ‘freedom of speech’ comment. I myself have said things that ran into a imprisonment of speech. The truth can cut and wound those that are not prepared for it.
This series is a terrific idea. Most articles addressing this particular topic cover the mechanical (superficial, “surface”) aspects of being an analyst or PM. I believe this is an instance where the Pareto principle applies: 80% of what most focus on generates only 20% of the results. The remainder is elusive.
I’m glad you began with self awareness. As the saying goes, there are many roads up the same mountain. But for most of us, only one or two of those roads are worth traveling; the rest will only end in frustration (and, potentially, loss of capital). I had to find out the hard way, but aligning my process with my self has made all the difference in my returns.
Happy to see that there will be six more of these – I can guess a few of them 🙂 but will patiently wait for the articles.
As always, all the best!
What excellent prose about your process of self-discovery as an investor. Over the years when folks have asked me for advice I always tell them to begin with self-discovery; else: wasted time and energy (i.e. source capital).
Nice Article. Highly recommended for everyone one in this field. Getting these kind of essential information absolutely worthwhile for building our career in equity research. Thank you so much for writing this, and i am looking forward to the upcoming articles.:)
Thank you so much for communicating your praise for my work; I take it to heart. It will be my pleasure to bring you more such stories in the future.
Great read! I haven’t attended any research tools/tech’s seminars that mention mndfulness. Yet, when I entered research I was struck with how emotional institutional investing (and investors) are. I was really surprised to see so many investors appearing to be driven by emotion. I have found mindfulness a powerful tool enabling introspection – even in the presence of strong emotions. Wish I had learned about mindfulness much earlier in my career (and life.)
Thank you for sharing your experience with mindfulness. Yes, it is surprising how many investors make deeply emotional decisions, but that are masked by an assumption that “fact-based” decision making has “solved that problem.”
Thank you for the nice brief article; self awareness is crucial even in other businesses as well.
I completely agree with your comment! Thank you for sharing your views with the rest of us.
Great article! Will definately follow you in the future!
I am so glad that you thought the article was great and am very pleased that you will be following the organization’s other materials now, too.
Excellent article and perfect timing for me. Last night I was mulling over what I need to change the most to super excel at my current Asset Management internship position. Everything is going great but I have a feeling deep down that something is lacking because I seemed to be operating on auto pilot, with not as much thought as I’d like. I quickly realized that the problem is, I do not have the inner calm I need to get to the next level. As such, I decided to embark on a 21 day meditation challenge – which I started this morning btw. I feel great at work now and after having gone through your piece, as well as the “Leading from the Center” article,I am much more determined to see this challenge through and add mindfulness meditation to my daily routine.
I will be most delighted if our kind audience can share some great links on meditation.
Thank you so much for sharing your time and thoughts.
Wow! What a great story you have shared with everyone – thank you for taking the time to communicate it to us all. I very pleased to read that these pieces on meditation have helped you; and congratulations on your internship!
As for links to meditation…are you looking for advice on how to meditate better? For scientific papers discussing meditation’s benefits? Or something else entirely? Meditation questions and their answers can quickly get intricate and complicated.
Jason -= What a wonderful way to bring value-added points to a highly rehashed discussion. Two brief personal experiences: When I was a young analyst, someone I respect very much drilled into my head that I adopt a mantra; in this case, the aspects of ADP’s business model that enabled it to gradually and boringly(?) appreciate through economic and market cycles. After hearing NG Kok Sung, I have an even better appreciation for where that mentor was coming from. Secondly, when I was in grammer school, our soccer coach had us sit perfrctly still, close our eyes and imagine making the play in 3-on-1 drills. No lie, after that brief meditation excersise, I went out and made the play time after time. To this day, I attribute that simple excercise to being the catalyst that turned me from a marginal player into a standout. Today, one of the key aspects I look for in analysts and PMs is the ability to show introspection and communicate how they use those lessons for constant growth.
Thank you for sharing your experiences with introspection and creative visualization techniques. I think that these kinds of skills are the future of the investment management industry. Many tools exist for investment practitioners, but educating the mind that decides why, when, how, where, and what tools to use is still cutting-edge technology.
That was a valuable article.really worthy reading
Thank you for your feedback, I am so pleased that you felt it was worth your time!
I am a discretionary trader. So all my performance depends on how disciplined I am and how clear my mind is or as my friend and tutor said “your daily routine is to fight your demons”.
About two days ago I considered starting tai chi classes to bring to harmony my body and mind. And look, yesterday I got an email with invitation to watch this video with practical advice on how to start meditating.
It’s a middle of the day and I stopped my work to meditate for the first time in my life! I found closing eyes helpful to avoid distraction. At least I have a developed visual memory so anything in front of me brings a lot of attention.
Thank you Jason and Ng Kok Song for this great vid!
Jason, which words do you find useful to use as a mantra? I understand that it all depends on each of us but how do you identify that correct (suitable) word or word combination to be used?
Thank you so much for sharing your comments with readers; what an inspiring story you have shared!
As for favorite mantras…my own usual meditation practice does not make use of mantras. But I have studied and practiced mantra meditation before. The key is to choose a word that has no meaning except within your meditation. Why? The word or words need to be divorced of external meaning, else the analytical function of the mind, coupled with memory, will activate and start making connections to your mantra. So if you use the mantra ‘cinnamon roll’ it has many associations so your mantra will immediately pull you away from your meditation. The mantra, therefore, needs only to have a private meaning associated only with your meditation practice. Does this make sense?
Yes, thank you, Jason.
Really great article as usual. The point of meditation is to bring the body and mind to stillness right? Thoughts may (probably will in my own experience) continue but the point is to not attach to those thoughts – to let them surface and dissipate. At the same time, don’t you sometimes have realizations or find clarity during your meditation practice? So it’s not like “nothing” happens. Maybe it’s an awakening or activation of the right brained thinking alluded to in your discussion with Ng Kok Song when the left brain usually dominates? I guess what I’m asking is can the mind be quieted and activated at the same time, something that may sound contradictory initially?
Yea! I am pleased that you liked the piece. Regarding your question…In the West, where we invest so much energy into developing the left-brain and mastery of analytical thinking we tend to think the ultimate goal of meditation is a silent mind and stillness. However, the point of that endeavor is to tame the runaway dominance of the left brain so that you can attain higher states of awareness and to develop non-attachment. In that state of consciousness, as you so smartly allude to above, a paradox occurs: awareness without thinking. Until a practitioner has achieved this state it seems an absurdity. But yes, that is what lies on the other side of stillness and quiet. By the way, stillness of the body can occur while the body is in motion, too (another paradox). Athletes refer to this as “being in the zone.” Perfected movement without thought. Moving while standing still. Sometimes people experience this state of consciousness in a car accident or other life threatening situation, too. Lieutennant Colonel David Grossman’s “On Combat” has many such descriptions of hyper-awareness/mental stillness achieved while there is much activity around you.
Thanks, as always, for your comments and contributions to the dialogue, Rob!