Typically, when people think of investors they picture wealthy business moguls or savvy stock owners wheeling and dealing their way into large fortunes. The reality is that investors come in all financial shapes and bank account sizes. An investor is simply anyone who commits money to an endeavour with the expectation of making a profit.

I’ve often wondered about the personal traits that can help to create a successful investor. Some people seem to have the Midas touch – everything they invest in turns into gold. Many others, however, seem to fail at any investment they undertake.

What does it take to win at the investing game? Is it lady luck, dominant genes, or hard work?

George Roper, deputy executive director of the Financial Services Commission (FSC), recently examined certain investing personalities, outlining some of the reasons for their successes and failures. Speaking at a financial education forum held by the FSC in association with the UTech Financial Students Association, Roper offered an interesting parody of the hit western movie, The Good, The Bad, and The Ugly.

Roper was speaking against the background of the growth of the unregulated financial organisations (UFOs) in Jamaica. He used the slogan, ‘The Sceptical, The Gullible and The Greedy,’ to demonstrate the actions of some persons who invested, or who considered placing funds in these alternative investment schemes.

Let’s look closer at Roper’s explanations of the effects of greed, gullibility and scepticism on the investing public:

The Greedy Investor

One dictionary definition for greed is ‘a selfish and excessive desire for more of something than is needed’. Roper explained that greedy investors were self-centred and totally blind to the needs of others. Greed, he declared, was an impulse that was not restrained by reasonable thinking.

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As greed grows, persons throw caution to the wind and may eventually make poor investment choices. Often, to feed their greed, investors will thoughtlessly involve others in unwise ventures, only to abandon them when these investments fail.

Warren Buffett, CEO of Berkshire Hathaway, and arguably the world’s most successful investor, agrees that greed can be a dangerous strategy to follow. “We simply attempt to be fearful when others are greedy, and greedy only when others are fearful,” declares Buffett.

The Gullible Investor

Gullible persons are easily duped or cheated; the dictionary uses the term to describe those who are unaware and naïve. Roper clarified that these persons place their trust in others too easily and willingly. “When it comes to investing,” Roper affirmed, ‘the gullible don’t think and check, or ask for proof of stated returns before they invest.”

Consequently, gullibility is one of the traits of most unsuccessful investors. Because they refuse to do their homework to verify the soundness of an investment, they are easy prey for con artists and impractical schemes. Gullible persons usually drift from one failed venture to another, as they never seem to learn from their mistakes.

Sometimes, despite our better judgement and best intentions, laziness can lead to gullibility. Mason Cooley, an English professor and author, put it perfectly when he said, “I am sceptical in principle, but gullible in practice.”

The Sceptical Investor

A sceptical person is characterised by a doubtful and questioning nature. The dictionary describes the sceptic as ‘an inquirer after facts and reasons, one who is yet undecided as to what is true’. Roper declared that because sceptical persons check all the facts for themselves, they usually save themselves a lot of heartache and money in the investing game.

Sceptics tend to be ridiculed by the greedy and the gullible when they refuse to take up risky investments. However, Roper insisted that they usually got the last laugh; reminding the audience of the saying ‘It is better to tell your money where to go, than to ask it where it went.’

The FSC executive indicated that many who invested in the UFOs displayed signs of greed and gullibility, while demonstrating little evidence of scepticism.

Roper’s recipe for successful investing is to first acquire a proper understanding of any potential venture. “To be smart investors,” he explained, “you then have to apply your knowledge to make wise decisions, using good sense and appropriate judgement.”

Arthur Levitt, former chairman of the US Securities and Exchange Commission (SEC) holds a similar view.

“Investors should start with a view of scepticism. They should become intellectual investors rather than emotional investors,” Levitt opined. “They should be careful, and they should be sceptical. They should ask questions, and if they don’t understand something, they simply shouldn’t buy.”