In last week's column, I referred to the importance of patience for the aggressive investor. Perhaps the term "aggressive" would better describe the type of returns this kind of investor achieves, because "aggressive" seems at odds with the characteristics that emerge from the pages of Douglas Bellemore's The Strategic Investor.
The word "aggression" brings to mind Vin Diesel, Jean-Claude van Damme and Stephen Seagal (although the last time I was forced to watch one of Seagal's movies - due to my being too lazy to make the trip to the video store - it looked like a few too many good dinners had slowed him down a bit).
Along with the disposition to attack, assertiveness also qualifies as aggressive behaviour. Apart from patience, courage features high on the list of the character traits the aspiring aggressive investor should acquire. Courage means taking responsibility for difficult decisions after carefully analysing the situation. At times, it means ignoring people who disagree with your views, which will often be contrary to popular opinion.
Hard work is equally necessary for successful aggressive investing. It is difficult and irresponsible to have the courage to invest in a share without doing thorough research first.
You also need a measure of intelligence, matched with some common sense. You can be too clever in this game; it is the ability to see the essence of a situation that matters.
In-depth analysis of a mine's grades and life will mean very little if the price of the commodity it mines keeps falling - as was the case with platinum shares in the late 1990s.
A close cousin to patience is emotional stability. You should not become caught up in either the panic or the euphoric phases of the market, but keep your decisions as free of emotions as possible.
A character trait shared by successful aggressive investors is the apparent lack of diversification. Courage enables you to construct a focused portfolio. Gerald Loeb, a market commentator in the 1930s, wrote that "the greatest safety for the capable lies in putting all your eggs in one basket and watching the basket". Loeb did not see the point of owning more than a handful of shares, including some turnaround stocks and more mature growers. He said you should make sure your basket of shares gives you an opportunity to reap returns at different points in the economic cycle.
One of the most fascinating reasons for geographic diversification given by Loeb was the fear of atomic bombing. I found this idea quite quaint when I first read it, especially Loeb's reference to risk in the property market in the event of a bombing.
However, it is a sober reminder that investment markets have a constant simmering fear of terrorist acts, and it also shows that some things don't change much.
Loeb did not necessarily advocate making investment decisions based on the possibility of terror, but pointed out that it is human for many to do so from time to time.
Although many successful investors own reams of shares, the aggressive investor tends to put quite a few eggs in one basket, shunning the 25-stock portfolio.
The reality of the South African market is that if you invest in the larger cap shares, selecting the right 15 stocks will probably buy you as much diversification as you can get. If you invest in small cap shares, it will be difficult to get a high degree of diversification, even if you own a large number of shares.
I have simplified a rather complex issue, but unless you feel comfortable that you have the characteristics of the aggressive investor, adopting the conservative approach of the more diversified portfolio is likely to be more rewarding for you. Either style works, but too much diversification is unnecessary for both.
As I pointed out in last week's column, you can be a successful investor without fanfare or excitement. Self-knowledge ranks right up there with good research when it comes to successful investing.
However, if you are satisfied that you can be aggressive in your approach, don't water down your efforts with too many shares. If you want to be aggressive as an investor, think like Horatio or Grissom in the television series CSI: calculating, patient, courageous and intelligent ... And if you still don't get it, ask a few of your women friends.