The Most Important Thing Is … Second-Level Thinking
The Most Important Thing Is … Second-Level Thinking
This chapter discusses an important requirement for successful investing: second-level thinking. Investing, like economics, is more art than science. One must remember how essential it is for one’s investment approach to be intuitive and adaptive rather than fixed and mechanistic. The definition of successful investing is doing better than the market and other investors. Would-be investors can take courses in finance and accounting, or receive mentoring from someone with a deep understanding of the investment process. But only a few of them will achieve the superior insight, intuition, sense of value and awareness of psychology that are required for consistently above-average results. Doing so requires second-level thinking. This chapter articulates the critical importance of second-level thinking to investment success and presents three examples illustrating its distinction from first-level thinking. It includes views and insights from four renowned investors and investment educators.
Keywords: second-level thinking, investment, investors, psychology, first-level thinking
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