One of the hardest things to do well, especially as an investor, is to learn from our mistakes.
When we pick an investment that does well, it’s easy to think about it, analyze it, dwell on how smart we are. But, when an investment goes against us, it can be very tempting to put those losses into our mental dustbin and try to forget them.
This temptation really should be resisted, because learning from our mistakes is more important than celebrating our victories.
Just as important, and more often overlooked, is that we should examine critically our successes, too. Sometimes good outcomes are due to luck and not skill. We need to understand which occurred to improve our results over time.
I like to look just as hard at my failures and my successes, because learning from both can reveal powerful lessons that can be applied in the future. I’ve found this can lead to much better investment results over time.
There are several questions I ask myself with both successes and mistakes:
- What happened at the underlying business in terms of fundamentals?
- What happened to the market price and valuation with respect to those fundamentals?
- Was I lucky, or good?
(I ask more questions than this, but these are the most important ones.)
No one relishes examining bone-head mistakes in detail, or realizing one’s brilliant outcome was luck instead of skill. But if you like improving results over time, the effort is well worth it.
Nothing in this blog should be considered investment, financial, tax, or legal advice. The opinions, estimates and projections contained herein are subject to change without notice. Information throughout this blog has been obtained from sources believed to be accurate and reliable, but such accuracy cannot be guaranteed.