In a recent interview with Bill Miller, who has averaged 13.95% average yearly gain in his fund since 1990, he talks about various aspects of good portfolio management. First he describes how to go about selecting the manager when you are shopping for an actively-managed fund:

You need to adopt a good process and there are a few signs.

1. If the person's been around a long time, is there's some evidence that this manager actually adds value, either by outperforming or by getting attractive results with lower risk?
2. Look for a long-term orientation, and the evidence for that would be a relatively low portfolio turnover. In a world of 110% to 115% turnover, something in the 50% range or less - ideally in the 20% to 30% range - is what would make sense.
3. Look for a value orientation. Doesn't mean that they would be necessarily a so-called value manager. I would look for somebody who actually thinks about the price that they're paying in relation to what this thing is worth, even if they're growth-oriented.
4. Look for evidence of what Warren Buffett calls emotional stability. And I also agree with him that managers need to understand how markets operate, how managing money for other people can create external behavior modifiers, and how our own internal behavioral tendencies can lead to sub-optimal decisions.
5. If you can measure or try to evaluate them, then I think intellectual curiosity, adaptability and flexibility are also traits that I would look for.
6. Avoid someone who is too dogmatic, too firm in their views, too sure they were right (even when they were right!) - I would be wary of that.

I think multiple sources are a good idea, just as we use multi-variate valuation models. When we value stocks, we're looking for things that converge towards central tendencies. And when people use multiple sources of information, multiple ways of evaluating managers, they should do better than people who are doing it less systematically.
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And Bill said, "Well, if you read Ben Graham's Security Analysis and The Intelligent Investor you'll be well versed in it. And then if you read Warren Buffett's shareholder letters and understand them too, you'll know everything there is to know about investing. And you will become a successful investor."

There are three elements for being a successful investor:

1. You need to know when you have some competitive advantage over somebody else. You don't invest unless you have some competitive advantage. There are three sources of competitive advantage in investing: informational, analytical and behavioral.
   1. Informational advantage means that you have access to inside information and are capable of legally acting on it.
   2. Analytical advantage means you know the same things that other people know, but you weight them differently, you give them different probabilities.
   3. Behavioral advantage means recognizing that for the average investor their coefficient of loss is about two to one, which means that they feel the pain of losing a dollar twice as intensely as they feel the pleasure of gaining a dollar. And they also tend to have what's called outcome bias, which is they judge things on their outcome, and not on their process. You really have to have a sense of discipline and patience, and understanding in that.
2. Money management means well, okay, if I've got a competitive advantage, how much do I invest? Do I invest 10 percent? 20 percent? 50 percent? Three percent? So knowing the proper money-management strategy, the proper amount of money to invest is the second thing. (See The Kelly Criterion below.)
3. Knowing yourself, that means knowing how you react to stress, how you react to adverse outcomes, how you react when things go well. Do you get giddy and overconfident when things are going well? Do you get morose and difficult when things go badly? Do you make bad decisions at both extremes? Just understanding your own psychology, what your weaknesses and strengths may be, as it comes down to evaluating decisions when the markets are at extremes.

Then he expanded on money management by using The Kelly Criterion for portfolio allocation:

2p - 1
where p is the probability [converted from percentage to decimal form]. So, to make it easy, if you were 100% certain that a particular investment would pay off at your expected rate, then 2 times that p is 2.0, minus 1, yields 1. That means 100% of your bankroll should go into that investment.

Now if you were only 60% sure, then it would be two times .60, which is 1.20, minus 1, equals .20. So 20% of your bankroll should go into that proposition.

What the Kelly criterion does is it gets you to focus on the probability that you are correct in your assessment, and then to understand that the amount of money you should commit is directly related to the probability that you are correct. It also shows that if you have less than a 50/50 proposition, you shouldn't bet at all. Which again, makes perfect sense.

And one final observation is that the evidence is overwhelming that most people are too risk averse. And that therefore they should be taking a lot more risk than they feel like is right.