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Collection: Mohnish Pabrai - #95 'Core Competence Of Investor'


Video Link: https://youtu.be/aJFkxAB1Ua0


In this episode, Mohnish Pabrai was asked what does he think is the core competence of investor? And how do great investors differentiate from the huge investor group?


In this episode, you’ll learn:

  • Why is patience the number one core competence of investor?

  • Why stock market is set up to be deceptive?

To check out all Collection: Mohnish Pabrai <click here>

 

[Transcript]

(Source: https://youtu.be/Jo1XgDJCkh4)

AUDIENCE MEMBER 00:00

First of all, thank you very much for your insightful speech. The question I want to ask here is that, what do you think is the core competence of investor? And how do great investors actually differentiate from the huge investor group? Thank you.


MOHNISH PABRAI 00:17

Well, I think that's a great question. Yes so I think that the number one skill set that an investor needs to have is extreme patience.


And in fact, one of the things I learn when I was putting these stock together is, like if I look at a company like Bluedart, which was the FedEx of India, I held the company for six years and it didn't do anything for six years and I sold it. And it had its run in the next 15 years, and there was no good reason to sell it. So the number one skill set is patience.


So if you are the kind of person who loves to watch paint dry, then this is the business for you. If you love to watch paint dry. And so if you are a hyperactive person who's already looking for action, this is not the business for you.


And so I think that in many ways, the investment business is a strange business. It's a business that is best for people who are what I would call, gentlemen or gentlewomen of leisure, where they have some other activity which is their primary focus and investing is a secondary focus so that they don't have a compelling reason to act. Usually, investors hurt themselves every time you (they) trade.


So Charlie Munger says "You don't make money when you buy a stock and you don't make money when you sell a stock. You make money by waiting." And in fact, what some of the things I talked about today show us is the huge advantages that once you – you know, you only learn about a business after you own it.


So if you do analysis of a business before you own it, you may know something about it, but you're really going to know more about it after you own it. And that's when you have an opportunity to perhaps understand which ones have truly multi-bagger possibilities and other ones that you should not touch and just let them play out for a long period. Patience is very important and that's what separates people.


And in fact, one of the things about stock markets is that they are deceptive because if you look at the market or the board which shows all the stock prices, you see them changing all the time. All the lights are changing and flashing. All the signal is telling you is to be active. It gives you all the signals to do something, and what you have to actually do is ignore all that.


So one of the thing – For example, one of the rules I follow is I do not submit any orders when the markets are open. Anytime I'm trying to buy or sell something, I usually send it at this time – after midnight – to my broker to execute the next day because there's no price changes taking place.


There's nothing taking place; everything is calm. And then during the time when the markets are open, it's very rare that I will trade. I basically avoid that.


So you can setup some tricks if you will to help you because everything is designed to make you be active. You know, your broker does not make any money if you don't buy and sell stocks. You know, if you just buy one company and just keep it forever, they will never earn any money. But it's good for you, it's not good for them. So all the signals are the wrong signals.


So patience is the number one that's what I would say.

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