John Meriwether Genius’s Limits

We always have a dilemma to our mind that we need to be intelligent to become a wise investor. But does it a reality? Do we really require to be an immense intelligence for the decision making to investing field? We have an example of a few highly intelligent person who has intelligence but lack of the real skill which needed to become a wise investor. I am going to explain it to the current article. Isaac Newton also cannot be saved from emotional biases such as greed and fear, though he has a brilliant mind.

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We should understand that a higher IQ, intelligence does not protect us from the emotional biases. We need to be a master of emotional biases for earning money through investment. If we do not have mastery on our own emotion then we incur losses into the investment.

Few emotional biases BIBLIOPHILE: THE MOST IMPORTANT THING BY HOWARD MARKS “COMBATING NEGATIVE INFLUENCES”

We have seen that the winner of the Nobel prize in economic of Long Term Capital Management (LTCM) also failed terrifically. They count as a genius mind during an era. During a tough time, their leverage position reaches the 100:1 which has killed the entire business.

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No model is perfect which can capture behavioral aspects of human. But we keep focusing on the same that our constructed model is going to capture all the madness and which make us mad. LTCM failure teaches us that we should not be overconfident to our model, we should focus on the risk management and we cannot capture the behavioral aspects of human. So that we should have control on own behavioral aspects that can help us for a longer period of time. Our intelligence should not be getting converted to the overconfidence, and if getting converted then it will definitely going to harmful for our investment career. Rather if we have a control on to our emotion then it will be going to help to our investment career though we have a little intelligence.

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Read for more detail: Big Mistakes: The Best Investors and Their Worst Investments by Michael Batnick

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