Investing is hard – part two

12Jun06

Investing is hard. We titled an earlier post on admitting investment mistakes. Being able to face one's mistakes is a crucial skill for any investor/trader.

It is at times like this when the market is in the throes of an unrelenting downdraft that many investors, professional and amateur alike, take stock in this endeavor we call investing. A sharp drawdown will naturally make any investor edgy and ask themselves is this what they want to be doing with their time?

Brett Steenbarger at TraderFeed identifies a "constancy of purpose" as a crucial element behind nearly all successful individuals. These people:

They find a field that captures their imagination and interest, and they tinker at it and work with it until they reach a high level of mastery. This constancy of purpose is driven by a love for the effort itself…

Think for a moment what that means for investors/traders. The best traders are probably not those who are solely in it for the money. The best traders will be those who are fully absorbed in the process of portfolio management. One need only think back to the day trading boom to see how their ranks thinned once the market turned. In a sense the poseurs were separated from the truly dedicated. Steenbarger continues,

Ed Seykota noted that good traders have talent, but–with great traders–the talent has them. So it is in any field. Constancy of purpose comes from the capacity to become absorbed in one's pursuits, to find them inherently challenging and meaningful, and to allow oneself to become a vehicle through which talents and skills are expressed.

To these types of traders the market correction is a chance to learn from their mistakes and to seek out opportunities in a changed market. Investing is in a sense too hard to do if you do not get some sense of enjoyment and accomplishment from the process. If the market malaise has gotten you (way) down maybe it is time to rethink whether a life in the markets is right for you.

The idea of a "constancy of purpose" sounds to us a great deal like the concept of "flow." The definition of flow (via Wikipedia) is:

Flow is a mental state of operation in which the person is fully immersed in what he or she is doing, characterized by a feeling of energized focus, full involvement, and success in the process of the activity. Proposed by psychologist Mihaly Csikszentmihalyi, the concept has been widely referenced across a variety of fields.

However defined, successful traders are fully immersed in their craft and enjoy the challenges put forth by the market. Good luck out there.

Update: TraderFeed recently added a second part to the original post focusing on development and self-mastery. A third part is up on the role resilience plays in continued self-improvement. The fourth installment emphasizes who experts experience their fields differently than amateurs.  The concluding post is up on the importance of finding your niche.

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