Live like you will die tomorrow but learn as if you will live forever–Anonymous
If you are conscientious and diligent in writing down (or recording) the reasons for your investment decisions, then reviewing both successes and failures will be easier. You must review to learn how to improve. What patterns in your thinking do you detect? What is fixable? When I mean failures, I don’t necessarily mean a loss on an investment, but faulty analysis, too large a position, and/or a mental mistake. I believe few investors learn from their mistakes.
To be fair, investing mistakes are both costly and difficult to glean the proper lessons. For example, in the audio in the link below, you will hear the presenter discuss one of his mistakes; he bought a overleveraged mortgage lender (LEND) during a “50-year credit crisis.” Over leverage will kill you. Yes, but how do you avoid a credit crisis a priori? What can you learn that would have prevented you from buying such a company in an impending crisis.
Learning the right lessons is not as easy as it may appear. Writing down your reasons for the investment is critical to avoid a mass of hindsight bias and delusion. Periodically, go back in a few years to review your old investments in light of your experiences and knowledge.
One investor has publicly been good at reviewing his past investments in an open style. The links below will take you through his analysis of past investment successes and failures. Do not fixate on the particular investment so much as they way he reviews his actions. The goal is for you to develop your own method of reviewing your investments.
Investment Post mortem
Investment Post mortems_AR_2011
2011_PIF_AM_Slides with transcript 2011_PIF_AM_Transcript
ivey_april_2012 slides with this audio: http://www.bengrahaminvesting.ca/Resources/Audio_Presentations/2012/Pabrai_2012.mp3
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