An investment increases in value. We feel confident in our judgment. An investment declines in value. We question our decision.
However, price performance alone does not determine whether an investment decision was sound. Disciplined investors evaluate the decision-making process, not merely the outcome. After an investment has had sufficien8t time to develop, consider the following:
🔹 Did I understand what I was purchasing?
🔹 What evidence supported my original investment thesis?
🔹 Did I adequately assess the associated risks?
🔹 Was my position size appropriate?
🔹 Did I act in accordance with my plan?
🔹 What relevant information did I overlook?
🔹 Has anything changed since I initiated the position?
A sound decision can produce an unfavorable outcome. Conversely, a poor decision can produce a favorable result through luck. If we evaluate decisions solely by their profitability, we may unintentionally reinforce the wrong lessons.
🔑 Key Takeaway: Do not ask only, “Did I make money?” Ask: "Was my decision-making process sound?” This question helps investors improve over time.
🧠 Practical Reflection; Select one past investment and divide a page into two columns: WHAT I DID WELL and WHAT I WOULD DO DIFFERENTLY. Be honest, but remain objective. The purpose is not to assign blame. The purpose is to improve your next decision.
🌱 Thought for the Day. Every investment provides two potential returns: Money or a lesson. A disciplined investor strives to ensure that neither is wasted.
Systems over emotion. Conviction over noise.