The four traits of successful investors

Temperament is the mindset behind the decision. It’s how you process information, handle volatility, and stick with your process when the crowd loses its head.

Over time, if you watch closely, you start to see the same traits in the best investors: patience, independence, humility and resilience. Together, they form the psychological foundation for long-term investment success.

Patience: waiting beats chasing

Patience sounds like a cliché until you see how rare it really is. In a world wired for immediacy, it takes real discipline to sit still. I’ve seen solid investment strategies unravel, not because they were wrong, but because someone couldn’t resist the lure of a quick win, or let fear drive a rushed sell during a dip.

Lessons: Alvia Asset Partners got impatient and missed the rally in A2 Milk shares.

We made that mistake last year. In 2022, we bought A2 Milk at around $5. Operational metrics had deteriorated, but with a strong balance sheet (around $700 million of cash at the time) we thought they were poised for a turnaround in Asia. After two years of little progress we figured the company had the turning circle of a submarine and exited at roughly our entry price, having made no money. Since then, the stock has rallied about 60 per cent. The thesis wasn’t necessarily wrong. We just didn’t stay the course.

Patience isn’t passive. It’s about having a clear idea of what you’re looking for and being willing to wait for it. That’s harder than it sounds.

This isn’t a new idea. In Warren Buffett’s 3rd annual letter to investors in 1958, he warned, “There are undoubtedly more mercurially tempered people in the stock market now than for a good many years, and the duration of their stay will be limited to how long they think profits can be made quickly and effortlessly.”

More than sixty years on, not much has changed. Markets are full of “renters”, investors drawn in by hype, who exit just as quickly when volatility strikes. By contrast, “owners” endure, and they compound.

Independence: thinking beyond the herd

Lots of people talk about contrarian investing. Few practise it. We’re wired to feel uncomfortable when going against the crowd.

I’m not saying be contrarian for the sake of it. I’m talking about independent thought and knowing why you own something, beyond the fact that it’s going up. If you don’t, your conviction vanishes the moment the market turns.

Nowhere is this more evident than in the US, where a decade of outperformance has fuelled the ‘US exceptionalism’ narrative. US equities dominate global indices, with a “magnificent” handful of companies driving most of this. It’s no different in Australia. Our seven largest companies, mostly banks, now make up around a third of our local market. Despite CBA trading as the most expensive bank in the world on just about every metric, there wouldn’t be a large super fund in the country brave enough to leave it out, no matter what their valuation models are telling them. We don’t own it. The opportunity cost is simply too high, especially when you have a global opportunity set.

Professional investor Jeremy Grantham said the bigger the new idea, the more the market becomes overpriced. We see this pattern repeatedly. Hype inflates prices, fundamentals fade into the background, and the herd follows. Until it doesn’t.

Independence means seeing clearly when others don’t. In 2023, when office space was deemed obsolete by the WFH movement, we acquired a 37 per cent stake in an A-grade CBD office tower. Our contrarian play has delivered roughly 11 per cent per annum yield on an asset that would be extremely costly to replicate with today’s construction costs. It wasn’t popular at the time, but it made sense to us.

Humility: knowing what you don’t know

One of the most dangerous things in investing is certainty.

If you’re not prepared to admit mistakes and recalibrate, small errors become big ones. Great investors balance conviction and humility. Sticking to a thesis while staying open to the idea that they might be wrong.

That means applying a lens of self-reflection to how portfolios are built, monitored and adjusted. Try to regularly ask yourself:

Am I being honest about why I own each position. Would I still buy it today?

Am I making changes for the right reasons, or just reacting to discomfort?

Does this decision reflect an investment belief, or emotion?

If these questions feel confronting, they’re doing their job. They’re designed to sharpen your focus and help invest with clarity, especially when the market doesn’t.

Resilience: drawdowns are part of the job

Every investor hits rough patches. What separates the best from the rest is how they respond.

I’ve seen people cut great businesses from their portfolios because they couldn’t stomach the headlines. I’ve seen others calmly add to positions during chaos, trusting in the work they’d done. Resilience isn’t about being fearless – it’s about having a process that you trust more than the noise around you.

In March 2020, when Covid hit, a lot of portfolios were thrown into panic mode. We stayed invested, made a few deliberate changes, and leaned into businesses priced for Armageddon, a once in a decade (or two) entry point.

Nick Scali was one of them. Already under pressure from profit downgrades in 2019, the stock fell about 60 per cent during the Covid sell-off. But its business model, with minimal working capital and excellent visibility on future earnings, were traits we valued when others didn’t. Were people never going to buy furniture again because of a pandemic? We thought not. We still own it today, following a 500 per cent rally from its Covid lows. Holding on through the constant consumer confidence noise has taken real conviction.

That kind of conviction paid off. A year later, our average family office mandate had returned 60.9 per cent, not by chasing momentum, but through conviction built in quieter times, and held through louder ones.

One more – temperament: still the last true edge

With legendary investor Buffett handing over the reins at Berkshire Hathaway, there’s plenty to reflect on what’s made him so enduring. It’s not just the quality of the businesses he’s owned, it’s the quality of the decisions made over decades, under pressure, in public, through every kind of cycle. That’s solid temperament.

We live in a world with more information than ever before, but more confusion too. With this deluge of information, fewer people have the mindset to use it wisely.

This year’s volatility has made that painfully clear. In April, $US6.6 trillion was wiped from US equites in just two days. That kind of volatility isn’t going away. But investors who maintain their temperament through the chaos will always come out stronger on the other side.

Nathan Robertson is the CEO of Alvia Asset Partners, an independent investment firm that manages the wealth of a select group of families.

This article first appeared in The Australian as The four traits of successful investors