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Does The Myers-Briggs Type Indicator Identify Better Value Investors?

March 25, 2013 | About:
The Myers-Briggs Type Indicator (MBTI) is now widely used in schools and the workplace to identify appropriate career paths for different people.

I previously wrote about an article “Why Introverts Make Better Value Investors,” so I will skip the part on introversion and extroversion and move on to the other components of the MBTI. It is apparent from the article that I favor introverts as people with better value investing qualities. The fourth preference pair, judging or perceiving, is not a significant factor in determining a good value investor, as it represents a person’s orientation to the outer world and the behaviors that others observe.

With respect to the second preference pair, sensing or intuition, individuals who prefer sensing focus on what is actual and current. This seems to tie in well with the “no forecasting” and “anti-DCF” stances adopted by many value investors. On the other hand, individuals who prefer intuition are more concerned about the future and like to work with new possibilities and abstract theories – they seem to be the kind that will invest with investment themes such as clean energy.

For the third preference pair, thinking or feeling, my vote goes to thinking. Those who prefer thinking tend to decide things from a more detached standpoint, compared with those who prefer feeling, who willassociate or empathize with the situation. More often than not, emotions have proven to be a stumbling block for value investors. Also, one of the reasons that quantitative value investing has caught on with certain segments of the value investing community lies with the fact that investing based on qualitative factors eventually leaves room for emotions to influence the buying and selling process.

In conclusion, among the 16 personality types, I think (not feel) that ISTJ and ISTP make better value investors. Please find below the descriptions of the two personality types from the Myers-Briggs Foundation.

ISTJ[/i][i]Quiet, serious, earn success by thoroughness and dependability. Practical, matter-of-fact, realistic, and responsible. Decide logically what should be done and work toward it steadily, regardless of distractions. Take pleasure in making everything orderly and organized – their work, their home, their life. Value traditions and loyalty.

ISTPTolerant and flexible, quiet observers until a problem appears, then act quickly to find workable solutions. Analyze what makes things work and readily get through large amounts of data to isolate the core of practical problems. Interested in cause and effect, organize facts using logical principles, value efficiency.

Do they appear to be apt descriptions of some of the investment gurus we follow?

About the author:

Mark Lin
Mark is a private value investor and runs the Cheapskate Investing website which borrows from the wisdom of value investing giants, using a systematic quantitative screening approach to filter the global stock markets for cheap cigar-butts and wide-moat compounders. He is also a regular contributor to various value investing communities.

Visit Mark Lin's Website


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