I think it is worth , regularly considering your actions and whether they are helping or hindering your progress. As such here are 10 behaviours that I will be looking to improve over the next few months.
That said many of these are areas I have been working on for some time – It is a journey not a destination.
1 – Don’t get affected by other people’s returns. Given it’s the end of the calendar year there has been a lot of investors and traders putting up their results for the last 12 months. Many of them are beating me by a mile. I have to admit to wondering why they can achieve these returns and I cannot. Now there are lost of ego satisfying explanations – they are lying, their volatility is very high, they don’t calculate correctly etc. But fundamentally I know that I should not let them affect me and its something I am working on. This is not the same as reviewing general market returns and ETF / fund returns. If you routinely cannot beat these then perhaps you should be investing in the funds that beat you rather than investing directly.
2 – I think I need to get better at recognising risks. And then operate to remove or avoid those that are not sufficiently remunerated. There is a thesis within investing that risk and reward are inherently related. But in many situations reward can often be significantly separated from risk or indeed once established we can review whether it is suitably compensated. In the last year I have read quite a few “risk” recognition strategies and I will be trying to put some of them into practise in the next year.
3 -Simplify the thesis. O’Shaughnessy shows that adding a few factors can work to maximise returns and minimise volatility. But there has to be a limit to the number of factors and as with diversification whilst the first couple bring big gains they have a diminishing effect. As an investor there is often a desire to know more and this is no bad thing. But I need to get better at knowing when I have sufficient information and to act from that point.
4 – Before making any investment be clear in my own mind as to what the edge is. I think you have to approach the market with some level of humility, so be clear as to why I am making the investment and as to why I know more than Mr Market.
5 – Try and trade less frequently. I am conscious that I have been making too many trades. Usually adding to investments I have already made. I need to buy a bit more at the start and trade a bit less.
6 – Avoiding big mistakes is at least as important as picking big winners. This is partly related to risk management and partly related to reacting to risks when I see them occurring. For the last couple of years I have been too slow to recognise that investments I have made have been wrong and that rather than spend too long considering my position I should recognise the mistke and move on.
7 – Be patient. Whilst I think I am better at this than I was I can improve my ability to just sit on a position awaiting the market to come around to my way of thinking.
8 – Try a mechanistic strategy. I have spent a lot of 2015 and 2016 reading about mechanistic strategies and how they beat the experts. In 2017 I am going to try a limited implementation of a strategy. I will keep it small, at least to begin with, but I will be looking to buy what hits the trigger point and once I have a few iterations I will write on how well or badly it has gone.
9 – Try some meditation. I listen to a lot of podcasts and there is a lot of people saying it helps them both in investing and life. It is not something I have ever done before so I hope it will be an enjoyable and useful experience.
10 – I do not know whether this should be last or first on the list. It is one of the many things I do not know. But I am intending to spend more quality time with my family. Not entirely sure how this is going to play out. But currently looking at more long weekends, city breaks etc. Of course my family’s version of quality time and mine may vary.
Source: @jpsc01 Jonathan Curry