Arming yourself with a sound investment philosophy and search strategy puts you on the path to selecting businesses suitable for investment. Once a business is valued, the most difficult determinants of whether to invest or not come into play.
Unlike valuation, which primarily relies on quantitative measures, investors now must rely on qualitative factors:
- Having the discipline to say no.
- Being patient.
- Having the courage to make a significant investment at a maximum point of pessimism.
These factors are exceedingly important because the probability of suffering investment loss is significantly higher due to the emotional underpinnings of these factors.
Most investors are smart; few, however, are disciplined enough to say no and move on or, more important, be patient. Very few activities in life can be practiced successfully without some degree of discipline. Being disciplined requires you to think independently and ignore crowd psychology. Discipline requires investors to be confident in their research and analysis and be prepared to receive criticism from all angles.
Yet disciplined investors clearly realize that investment success comes from sticking to their methods and not participating in crowd folly.