What Makes a Good Investor?

Barry Ritholtz:

Graduation season is upon us. From the next generation of Warren Buffett wannabes, I occasionally hear questions such as “What should I learn to become a great investor?”
Contrary to popular belief, investing isn’t a traditional academic discipline. Money management is hardly a typical major. There are, of course, plenty of “Business Administration” undergrads, but their focus tends to be on running companies, rather than investing in them.
We churn out MBAs like made-in-China widgets, yet few ever become outstanding investors. And don’t even ask about economists — the profession that missed the housing boom and bust, the Great Recession, the credit crisis and the market collapse.
Great investors are savvy generalists. I can think of five fields that are hugely helpful to asset management. If you were to study these disciplines, your understanding of how markets work would greatly improve. And you would be a better investor.
How? You will generate better risk-adjusted returns; meaning, you will get the most bang for the bucks you are putting at risk. You will suffer less from volatility — the stomach-churning ups and downs in the markets that are one part risk, one part opportunity. And you will avoid the typical mistakes that most investors make.

He recommends an understanding of history, psychology, skepticism/logic (his example is a trial attorney in a courtroom), mathematics/statistics and accounting. I tend to think that good professionals of all kinds need a background in each of these fields.  They can come in handy no matter what somebody is doing.  The hard part is that the person will have to make efforts on their own to learn some of these fields, or spend a couple of extra years in college taking courses outside of a single major.  That is kind of what Barry did:

A reader recently asked me what was my undergraduate “Class of”.
That turns out to be a surprisingly long story.
The short but inaccurate answer is Class of ’83. But in my junior year, I switched from applied mathematics/physics to poli sci/philosophy, which meant I was on the 5 year plan. So I got to I hang around til ’84.
At the time, I never physically received my diploma; On graduation day, a few friends got together and, um, well, let’s just say we had our own graduation ceremony.
No pomp, lots of circumstance.
I simply assumed I graduated. I had a ton of credits courtesy of the 5 year plan meant — something like 136 total, when I only needed 120 credits needed to get my BA. When I went off to law school 2 years later, I never gave it a second thought.
Perhaps I should have.
Funny thing: Because I was on the equestrian team (really) I ended up with P/E credits. Many, many way P/E credits. In fact, too many. It turns out there was a cap on gym classes; back out the excess, and I had only 118 credits left to apply towards matriculation.
I only discovered this deep in my 3rd year of law school, when they had to certify that I was qualified to sit for the Bar Exam in NY.  As it turns out, one of the qualifications was having a college degree. Which, as it turned out, I didn’t have.

The whole story of how he graduated with an undergrad degree and a law degree the same day.  The guy is an interesting person, and he's worth checking out each day at The Big Picture.