Investing is 10% IQ and 90% behavior
Started investing in stock market in the beginning of 2009 but exited within 8 to 9 months, because I disliked volatility and I felt that majority of the investors were traders.
My rational was that if 95% of them are speculating, my chances of getting good returns based on logic won’t work. I felt that being part of the minority, one has no say in the market.
After the exit, I got busy with my job, invested some money in real estate and lending business. 2014 I co-founded a company with some savings and seed funding, and for next 6 years I was fully busy building it from ground zero.
2020 lockdown happened because of Covid-19, and I had some free time and money to invest. I found investing in real estate was a hustle, lending a risky business, hence returned to the market to see if there is more to my past understanding of it.
This time around started with reading some books on market (“One Up on Wall Street”, “Bulls. Bears and other Beasts”, “The Warren Buffett Way” etc) and following some twitter handles which were distributing knowledge for free. Both helped me understand that I am wired for long-term investing and I don’t have to worry about volatility much, but the bigger revelation was that I lacked “patience”.
So why is investing 90% about behavior?
There are tons of tools and information platforms which can tell you all about the companies you are trying to research and buy. 100+ economic metrics, research report on industry’s past, present and future performance, annual reports etc, all at your disposal, available for free.
Behavior on the other hand, cannot be learned in a day/week/month, it requires years of practice in real world of investing. Patience to wait for company’s performance and price to converge, patience for things to play out, not panicking during crash, not being greedy during bull market, ability to hold one’s ground based on your independent research & conviction. This is the tough part and hence investing is 90% behavior and 10% IQ.
I will leave you with this wonderful quote from Peter Lynch which summarize this blog — “In the stock market, the most important organ is the stomach. It’s not the brain.”