You should always be looking for ways to improve your investing and returns. Even a few extra basis points in returns will compound over time. Below are three ways to help improve your investing: journaling your investing, getting a second opinion and tracking your performance.
Writing it down
Investment journaling is seldom practiced, but can be hugely beneficial. The obvious benefit is that it allows you to review why you bought or sold a certain stock and whether it worked out or not. By looking back on your journal you can remind yourself of the things that did not work to avoid making the same mistakes again.
For myself it is a chance to slow down the investment process. I will not buy or sell until I have written down the reasons for my actions. This allows me to take stock of the risks and reasons for the given decision. It does not pay to rush investing decisions – impatience is a common folly among amateur and seasoned investors alike.
Amateur investors will often buy a stock on a vague tip from a well-meaning friend. This is a poor strategy. If you have to write down why you are planning on buying a stock and all you can write down is: “Tom heard from a guy at his work that this stock will go up,” you will hopefully pause and reconsider the purchase.
A second opinion
Everyone has different points of view and different investment styles. This makes share market investing interesting. There is no right or wrong way to invest – it is just what works for you. This will depend on your situation, perspectives, and risk tolerance. You should always, however, keep an open mind to other points of view and investing styles.
Bouncing investment ideas off other investors is a good way to get some feedback on investment strategies and possible purchases. Fund managers and other professional investors have always done this. Analysts will present stock ideas to the portfolio manager and other analysts at meetings, who will in turn look for holes in the first analyst’s reasons for purchasing a stock.
You can do your own version of this with friends, at an investment club, or online.
Strawman is an investing website where you can create a profile and recommend stocks, writing a blurb about the stock you are recommending. Your recommendations are tracked and other members can see your performance track record and time frame. It is a fun way to journal your investing, keep a record of your performance, and look at other investors’ opinions of a stock.
Having an online record of investment performance will make most investors want to invest a bit more carefully, especially if you are the competitive type.
Are you winning?
The point of investing is to get a return each year commensurate with the level of risk you take. Track your returns, which are your capital gains plus dividends received, minus brokerage and any other transaction costs.
Obviously a longer successful track record is preferable, as it is difficult to paint a picture of an investor’s skill in only a short time period. When you Invest you are buying part ownership of a company, and companies take time to grow. Investment ideas can likewise take time to come to fruition.
Tracking and being mindful of your returns may make you consider share purchases in greater depth. It also makes you think about the components that make up your total return aside from capital gains – dividends and transaction costs.
- Take the time to write down why you are buying or selling a stock – this will give you a record to look back on and slow down your process.
- Look at other investors’ opinions or viewpoints as you may have missed something and could learn from alternate perspectives. It is important to keep an open mind to other investment strategies.
- Track your returns and keep them in mind when investing. Try to get the extra basis or percentage points by improving where you can.