Investors have to have nerves to weather market cycles.  Heart is making inroads in social investing.  Brains on the other hand, are hit or miss.  It’s not that any investor lacks the brains, it’s that human behavior sometimes trumps our rational sense.  At Index Universe, an experienced active stock picker reflects on his metamorphosis to a passive indexing strategy.

It is fairly safe to say that most investors start off as active stock pickers.  In discussing with my colleagues, it is easy to trace why this is the case.  During our college years, the emphasis is typically on quantitative, technical, and fundamental analysis.  We study statistics, economics, corporate finance, and accounting.  Then we learn how to adjust financial statements given various situations, and how to recalculate our ratios.  With this depth of knowledge, speculating and forecasting is a natural progression.  There comes a point where the path can become more important than the destination.  That can be a slippery slope.

Investing is a way to help us achieve our goals.  Roads are not paved in gold, and usually they are full of potholes, ice, and detours.  Still, if we drive safely and smartly, our chances of reaching our destination are that much better.