Housel’s Fundamental Investing Skills

In an article for the Collaborative Fund earlier this month, Morgan Housel shares what he sees as the four skills most relevant in investing:

  • “The ability to distinguish ‘temporarily out of favor’ from ‘wrong.'” Housel emphasizes that it’s difficult to distinguish between the two, but “worse, and more common, is forgetting that a distinction needs to be made in the first place.”
  • “The willingness to adapt views you wish were permanent.” He argues that investors tend to lend more credence to events that “align with their own experiences,” but that they must be willing to adapt their views to change to avoid being “eaten alive.”
  • “The ability to be comfortable being miserable.” This, says Housel, is the most fundamental investing principle. To make his point, he likens investing to exercise. “You can’t enjoy the benefits of exercise without some sort of discomfort,” he says, equating the financial rewards for being “comfortable” as an investor to the physical rewards for “sitting on the couch.”
  • “The ability to distinguish when analytics vs. psychology is necessary.” Arguing that investing involves both analytics and psychology, Housel says, “The trick is knowing when which skill is necessary, and how one affects the other.”