Losing money in markets is a common thing. Even if the stocks trades lower than your entry price, it does not mean that it isn’t going to go up ever again. Investors often realize after steep losses that there is no easy and safe investment out there, if this was the case, everyone would be doing it. There are no shortcuts and this is the sad reality. Most of the mistakes we make are avoidable, but for this to happen you need to change how your brain is wired. Most of us do not like to question our past decisions, but to become better investors, we need to constantly challenge our previous assumptions. To beat the market you have to be better at doing this, than the average investor out there. Learning from our mistakes is one of the keys, but you need to constantly question whether you are making the right decision and most struggle with this.
To be a good investor, you need to constantly remain skeptical of everything – even of yourself. You need to have your feet on the ground, and have realistic expectations towards things. Your investment strategy will evolve based on your ability to question your beliefs and change them if you see something wrong with it. This is how you avoid making the same mistake numerous times. Continuously conducting this type of internal dialogue is what allows you to improve your strategy. As a value investor, we often run into value traps. Stocks that appear cheap but are in fact cheap for a reason. We all make mistakes and some are avoidable if you are able to identify the pattern in the mistake. Allowing you to avoid them effectively.
Learn from others
Other investors can be an amazing source of knowledge and experience. Having discussions with multiple investors allows once again to solidify your investment strategy. Hearing other opinions let’s you formulate your own in a better way. There are also things to be learned in terms of mistakes. Although most of us try to learn from our own mistakes, we can also look at other people’s mistakes. Analyzing them will allow you to learn and improve, and possibly avoid the same mistake altogether. This is why bouncing ideas with other investors can be so advantageous to you and your investment strategy.
Put into practice
Once you analyze a mistake you have made, or that others have made. Start questioning yourself every time you face a similar situation. Is this just like last time? What is different this time? This is the key to improving and constantly avoiding making the same mistakes over and over again. Start an entry journal, and write your mistakes down, in a clear and concise way. This way every time you need to make an investment decision, you can go back to your journal and step by step see if there is any mistake you might be repeating. Learn time and time again, and you will get better at avoiding investment mistakes.