Flexibilty key for Boston Capital's Manager of the Year

Steven Syre's "Boston Capital" column in the Boston Globe has selected a winner for this year's manager of the year distinction: Maura Shaugnessy with the MFS Utilities fund. The fund has earned 31% so far for 2006, and has averaged 28% per year over that past 3 years.

Shaughnessy attributes her success to flexibility: "If they're in Argentina, Massachusetts, or wherever, it doesn't really matter to me. It's about finding the best relative idea." Shaughnessy says that good new investment ideas are harder to find right now.

Shaughnessy's ideas about the importance of flexibility in investing are good lessons for any investor. As Jim Cramer has said you have to be "willing to vote for something...before you vote against it." Flexibility and a willingness to adjust to new information is key to success in financial markets. Lack of flexibility in thinking is the enemy of sound investment decisions. Confirmation bias, the natural tendency to interpret new evidence in terms of previously held convictions, can lead to disaster for stock pickers. It's a cognitive bias that may have prevented many investors from selling stocks like Enron at the first sign of trouble.

For more about how cognitive bias and bad reasoning can interfere with investment decisions, pick up a copy of Why Smart People Make Big Money Mistakes . It's a terrific introduction to the study of behavioral finance, and how our genetic imperfections effect our investment decisions.

Photo: Boston.com