STREET DOGS

If confidence is overrated when it comes to investing, humility is underrated. It’s also much harder to find.

Nor should it be confused with low self-esteem. Humility is simply about focusing on the unknown rather than the known. Whereas confidence comes from the things we know, humility comes from the overwhelming number of things we don’t know.

“Successful investing is a delicate balancing act,” says Christopher Parvese. “It requires enough confidence to hold onto positions when every bone in your body suggests you are wrong. And it requires the humility to recognise when you are wrong.”

Humility may be one of the most useful traits you can develop as an investor during a bull market, to remind yourself that the good times won’t last forever and you’re not as intelligent as rising markets may make you feel.

“Success is an underrated risk,” says Jason Zweig. “Being right is the enemy of staying right partly because it makes you overconfident, even more importantly because it leads you to forget the way the world works. Risk’s greatest fuels are debt, overconfidence, impatience, a lack of options, and government subsidies. Its greatest enemies are humility, room for error, and government subsidies.”

“We think humility is essential, especially concerning the ability to know the future, says Howard Marks at Oaktree Capital. “Before we act, we ask if there’s good reason to think we’re more right than the consensus view already embodied in prices. It’s important to acknowledge our limitations and put the highest priority on avoiding losses not executing bold strategies. It’s frightening to think that you might not know something, but more frightening to think that, by and large, the world is run by people who have faith that they know exactly what’s going on.”