Clues to detecting the astute investor

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You may have encountered some financial talk at cocktail parties or neighborhood cookouts. The discussions may have centered on low mortgage rates, debt consolidation deals, and skyrocketing stocks. Sorting through who really knows what they’re doing and who doesn’t can be tricky but, over time, if you watch the game enough, you’ll figure out who the experts are.

Here’s my take on the characteristics of the astute investor; he or she:

• has invested money over a long period of time and has actively managed a portfolio through market bubbles, bubble bursts, corrections, and crises

• can quote the P/E ratio of a stock as quickly as its share price 

• consumes financial information from multiple sources

• realizes that a stock tip is not a recommendation to buy a stock at any price but rather a mention of a company to begin researching

• studies the strengths, weaknesses, rewards, and risks of market sectors; and knows which companies are best of class in these sectors

• possesses humility, most likely gained from living below his/her means in order to invest and from making at least a few investment mistakes

• knows that net worth is much more than the value of one’s primary residence

• considers charitable giving a given, not an afterthought

• is eager to learn what others know about a sector or company

As you may have guessed or will soon discover, the biggest portfolio and the best performance returns don’t always belong to the smoothest or loudest talker.