Investor Skills and Traits
A newsletter focused on investor skills and mindset to build wealth and Embrace Any Future.
Today I’m launching a coaching structure to the newsletter with the focus on being an investor and expanding our investor mindset to advance our financial capabilities and resources over time. I believe creating financial flexibility and freedom as an investor can help you Embrace Any Future that comes your way.
Growing up, I didn’t have many investors in my life. As a result, I educated myself through books, articles, letters, and, later, videos and podcasts. Being an investor today has both its benefits and challenges. With easy access to information, knowledge, and experiences, it’s easier to become an investor. However, with the abundance of information, it’s also more challenging to filter out the noise and find insights that resonate with us.
I say this as there are so many ways to be financially successful. That diversity is excellent and allows for a vibrant marketplace of choices. At the same time, it requires you to be quiet and still hear how your head and heart respond to the information you take to determine if you want to be an investor and capital allocator or a leader with an investor mindset and invest your company’s capital.
To help those interested, those who mentor others and are looking for content, and to further my own journey, I’m bringing structure to the newsletter and building an investor framework, which includes an investor mindset. Whether you’re looking to create your own wealth or become a leader in your company, industry, or community, having an investor mindset and framework will help inform your ideas and decisions.
Investors have These Skills and Traits:
Financial literacy: A good investor must have a basic understanding of finance, economics, and investment principles to make informed decisions. Margins, Organic Growth, Cash Flow, Earnings Power, Capital Allocation, and Competitive Returns above the Cost of Capital are all part of this equation.
Research and analysis: A good investor must be able to thoroughly research and analyze investment opportunities to determine their potential for growth and risk. If this involves purchasing a company outright, this goes even further into what is known as due diligence, including evaluating the target company’s financial, operational, and strategic aspects. I say all investments require work. There is no getting out of it. The amount of work will depend on the type of investments you wish to make.
Discipline and patience: Investing requires discipline and patience, as returns may not be immediate, and short-term market fluctuations can be challenging to predict. Things typically take longer to become a reality, both positive and negative. There are many examples to share that illustrate this point.
Diversification: To minimize risk, a good investor understands the importance of diversifying their portfolio across different asset classes, industries, and geographic regions. Diversification also involves the size of assets and position size and asset vehicles.
Long-term perspective: A good investor takes a long-term view and is not swayed by short-term market fluctuations or emotional impulses. Patient Capital is typically associated with this philosophy, and you will look out for favor with others. Keeping things close to the vest with those outside your professional team is vital, as influence is real.
Risk Tolerance: A good investor must understand their risk tolerance and be able to make investment decisions that align with their values, financial goals, lifestyle preferences, and their relationship with risk and how they manage their risk tolerance. I think of it at times as having a steel stomach.
Emotional Control: A good investor must be able to control their emotions and avoid making impulsive decisions based on fear, greed, or power. Investing is about work; fears creep in when we don’t do the work, know what we own, and are unprepared for a series of outcomes. Also, greed arises in those looking to make fast money, typically involving a greater fool on the other side of the trade.
Professional Network and Relationships: A good investor understands the importance of seeking professional advice from industry experts, legal, investment bankers, and investment community peers, especially when making an investment thesis and complex investment decisions. It’s good to “steel-man” and see if there are other opportunities or risks. I like the term “steel person,” so you know.
Continuous Learning: Great investors are committed to constant learning and seek new information and insights to inform their investment decisions. It’s reported that Warren Buffett and one of his lieutenants read six hours daily. Compounding information patterns can be impactful.
Adaptability: Excellent investors are flexible and adaptable and are willing to make changes to their investment strategy in response to changing market conditions. With the high turnover of Fortune 500 companies and tech advancements, being adaptable and comfortable with adaptability is crucial.
Deal Sourcing: Private equity investors are skilled at sourcing attractive investment opportunities, often through extensive networks and relationships. Feel free to double-click on Networking Effects on your Net Worth article, where we talk about the value of your network.
Negotiation skills: Private equity investors are skilled negotiators, able to effectively negotiate terms and deal structures that are creative, mitigate risks, and close deals.
Value creation: Private equity investors, as part of their model, create value in their investments, often through operational improvements, strategic acquisitions, and other value-enhancing initiatives and product/service innovations.
Portfolio management: great investors have a strategic approach to portfolio management, balancing risk and reward across their investments, classes, time horizons, and investment holding vehicles. This would include individual investors in taxable accounts, Roth IRAs, insurance products, etc.
Leadership and mentorship: investor-minded leaders are experienced strategic leaders and mentors who are magnetic in attracting and retaining top talent in their companies. This is important, for example, as great operators can cross companies within a PE investor’s portfolio.
Tax Optimization: Great investors understand the tax implications of their investments and use various strategies to minimize taxes, including deal structures, asset vehicles (401K, Roth, etc.), and cash recognition streams. Essentially, the goal is to reduce their tax liability and maximize their returns. John Malone is known for his expertise in tax optimization and his ability to minimize taxes through strategic planning. The recent The Warner Bros. Discovery deal is a prime example of his tax strategies at play.
I’m excited about writing on these subjects. I hope you find this instructive for those new on the journey as you build your investor mindset, portfolio, and future financial possibilities.
For myself, this is a daily practice of reminding and teaching me as I continue down my journey to advance women’s economic empowerment and close the wealth gap, as well as answer the personal financial questions for myself: “How Far Can You Go?”
Content for Your Learning Growth:
February 8, 2023
Interview with Jerome Powell and David Rubenstein at The Economic Club of Washington D.C. - Hear Fed Powell speak about how the Fed works, how the FOMC thinks about the economy, the importance of diverse perspectives, and the importance of staying connected across the globe.
February 1, 2023
January 31-February 1, 2023 FOMC Meeting Press Conference
February 1, 2023
Jeff Gundlach – Doubleline Founder and CEO known for his prowess in the Bond Market, shared his views post the conference.
Quote to Ponder:
“The best investment you can make is in your own abilities. Anything you can do to develop your own abilities is likely to be more productive in the long run than any other single investment.” - Warren Buffett
Share:
If you like what you are reading, considering sharing it with colleagues who you think could benefit from the content. Here are people I think of as I’m writing the newsletter:
Individuals looking to gain skills to be an investor.
Individual Contributors looking to bring investor skills to their corporate roles.
Corporate Leaders who are looking for curated content to share with their mentees. As well, non-P&L corporate leaders looking to add investor mindset skills to advance their competitiveness for VP and C-level positions.
Entrepreneurs who are interested in advancing their financial and capital allocation skills and strategic plans for their businesses.
Non-Profit Leaders who are interested in advancing their organization’s financial sustainability.