Clues to detecting the astute investor

by Julie Rains on 6 September 2007 6 comments
Photo: Matt Phillips

You may have encountered some financial talk at cocktail parties or neighborhood cookouts. The discussions may have centered on low mortgage rates, debt consolidation deals, and skyrocketing stocks. Sorting through who really knows what they’re doing and who doesn’t can be tricky but, over time, if you watch the game enough, you’ll figure out who the experts are.

Here’s my take on the characteristics of the astute investor; he or she:

  • has invested money over a long period of time and has actively managed a portfolio through market bubbles, bubble bursts, corrections, and crises
  • can quote the P/E ratio of a stock as quickly as its share price 
  • consumes financial information from multiple sources
  • realizes that a stock tip is not a recommendation to buy a stock at any price but rather a mention of a company to begin researching
  • studies the strengths, weaknesses, rewards, and risks of market sectors; and knows which companies are best of class in these sectors
  • possesses humility, most likely gained from living below his/her means in order to invest and from making at least a few investment mistakes
  • knows that net worth is much more than the value of one’s primary residence
  • considers charitable giving a given, not an afterthought
  • is eager to learn what others know about a sector or company

As you may have guessed or will soon discover, the biggest portfolio and the best performance returns don’t always belong to the smoothest or loudest talker.

0
No votes yet
Your rating: None
ShareThis

comments

6 discussions

Add New Comment

CAPTCHA
This test helps prevent automated spam submissions.
Guest's picture
zack

This article was better.

http://www.wisebread.com/the-forrest-gump-school-of-investing

Simple portfolio, set it and forget it, invest regularly.

http://diehards.org

Myscha Theriault's picture

I like to observe too, Julie.

We try also to make it  a personal habit to not follow the advice of anyone whose position we would not also want to be in.

Good post.

 

Guest's picture
Jonathan Ploudre

I'd say an astute investor skips over individual stocks and talks about asset allocation and expense ratios. A great groups of astute investors, in my opinion is at The Vanguard Diehards web board. I'm just a happy reader, not affiliated with Vanguard or the diehards forum.

Jonathan

Julie Rains's picture

Just trying to show ways of separating the wheat from the chaff at your friendly gathering, not  giving comprehensive investment advice.

From Myscha "We try also to make it  a personal habit to not follow the advice of anyone whose position we would not also want to be in." That was the inspiration for my post but not sure how to explain that to someone without insult.

Thanks to others for the links to diehards.

Guest's picture
Guest

first try to what are driving forces of stock price?
which stock to buy?when why? visit www.vbulls.com

Julie Rains's picture

Now that you mention that, I do know someone (bond guy) who talks about underlying movement in technical detail (not just in terms of what the fed is doing but much more) and is something I need to learn more about.