Great Investors are Philosophers

History’s great investors all have one thing in common: “They are investment philosophers,” according to an article in CFA Institute.

The “typical” fund manager “talks their book,” the article argues, while legendary investors such as Warren Buffett, George Soros and Peter Lynch instead focus on “big themes and trends that drive markets today and will continue in the years to come. They think about fundamental drivers, not about the recent data flow, and they have developed investment techniques that can adapt to a broad range of problems to understand the underlying market dynamics.”

The article describes books such as Benjamin Graham’s Intelligent Investor and David Dodd’s The Most Important Thing as timeless in that they focus on investing fundamentals rather than the technical elements of the markets.

The article advises investors to develop “skills in understanding market dynamics instead of memorizing data points or performing the DuPont analysis of return on equity.” While it says that investors need expertise in such technicalities, “there is little added value in doing it over and over again or to an ever more sophisticated level.”

It concludes: “That may keep you busy, but it won’t make you better, and it won’t make you a great investor.”