Let’s start with some Spring cleaning. Your success isn’t all about investment selection. The biggest mistakes tend to be very personal ones.
These are in no particular order. Some overlap, and some are alternates. But a good number will be recognised by most investors.
Think seriously about those which apply to you, and how you can sidestep them.
And feel free to add others into the comments at the end of the blog:
- You didn’t have any good reason to buy the fund in the first place
- You didn’t write down why you bought the fund (even if it was a poor reason)
- You believe you have some special insight or skill to select funds (or any other type of investment)
- You have no objective process to select funds (and investments generally)
- You tend to buy into stories – you are a believer rather than an investor
- You played “follow the fund manager” when they moved to pastures new
- You believe experts and press tips
- You tend to buy because everyone else does – in the herd rather than independently thinking
- You tend to ignore views and warnings which don’t support your fund purchase
- You ignore the evidence of the numbers, and prefer a good story, because it’s less effort
- You allow emotion to triumph over the evidence
- You find yourself holding onto funds long past their “best by” date
- You endure “the slope of hope”, where the slope is your fund’s performance going persistently down
- You are always, perhaps daily, checking performance
- You have given up checking performance, and don’t open emails or letters with valuations
- You don’t have a specific time when you actively review your funds (say 6 monthly)
- You do not use a simple method for rating funds which will prompt when to sell
- You have not identified a relative performance benchmark which, when breached, means you will sell
- You have not identified a level of falls which, if breached, will trigger you selling e.g. a 10% loss
PS feel free to pass this along to anyone else who needs their cage rattling!