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Thank you to Penny Daily for including us in its Carnival of Investing Strategies #5.

What makes a successful long-term investor? Is it an exceptional understanding of the market? Is it a Blackberry full of Wall Street contacts that tip you on every insiders’ move? Is it a PhD in quantum-physics or mathematics?

No. Because if that was the case, then most investment funds with their well-paid, well-educated, and well-connected managers would not be walking around with their portfolios 50% lighter.

So what is it about the market that suckers in so many people? How is it that some investors are ruthlessly spit out, and others remain relatively unscathed in the long-run?

Knowledge.

But not just business knowledge. What has been taught in business school and other rudimentary business classes do little to improve one’s chances when it comes to investing. Why? Because the knowledge presented in those accounting and finance classes only give you a myopic look at the whole picture.

For example, say you are an accounting maven but know nothing of what’s going on in the mortgage market in 2006. You look at the balance sheet of banks, match up the debit and credit sides, check off the triple-A rated loans, and marvel at how the bank has managed to grow so quickly in the last few years. But any economists looking at the picture would be alarmed at the rate of growth, probe deeper into the loan ratings, gasp at the poor judgment exercised on part of the bankers, and issue a warning. Someone who is schooled in politics would take a hard look at the political contributions made to head of committees that signed off on the predatory lending policies and yell foul! And any Tom, Dick, and Harry, who’s been canvassed by sketchy pseudo-lending institutions would tell you that if it walks like a scam, and quacks like a scam, it is a scam.

So there, it only takes someone who is in touch with reality to smell the foul. If confined to an academic or industry-conformed bubble, it will take someone who is willing to see the whole picture and dare to ask questions to reach the same, sane conclusion.

Here’s another more direct investing example, taken real-time off the happenings of the current market bloodbath.

When the market started going off the deep end beginning of the year, many respectable economists and analysts called for a sharp decline in the US dollar.

Not that the dollar didn’t deserve it. The stock market was abysmal, debts were piling up, inflation was fuelled by the astronomical rise in crude prices, and the gold bugs went nuts.

But the dollar didn’t fall, at least, not in 2008. Contrary to what many expected, the greenback went from strength to strength against the pound, the euro, the Aussie and Canadian dollars. How could they have been wrong? Their analysis made so much sense.