At Upside, we’ve spent literally thousands of hours thinking about this very topic: how to be a better investor.
Initially, we focused on professional analysts and portfolio managers, we collected data… tonnes of it. First, ex-post: analysing actual returns after they have occurred. Then we started to realise we were missing the most valuable insights: Ex-ante, working to predict future events. The things unsaid.
But then we were posed a challenge: how would you make a first-time investor better?
Well, that is a little like asking how do you get someone coming to the gym for the first-time fitter?
We started to break it down.
What is it that you want to achieve? A six-pack for your holiday (even if domestic, given travel now)? Recover from injury? Flexibility? The list is quite exhaustive.
In investing terms, it is similar. Is the money part of a long-term nest egg that you want to compound? Something you plan to add to regularly? Or is it to meet a much closer near-term goal? A holiday perhaps, or a new car.
The first step in the investing journey is understanding what you want to get out of it. Only by understanding this seemingly simple question can we progress.
The next question is around losing, and my friend, portfolio manager ATEC talks about this a lot.
We need to understand that to invest is to lose. More specifically, to control loss. That might sound odd, but it goes to the heart of it.
How you lose, how you react to losing will define how you invest, and how successful you are. The GREAT investors have a process or an instinct that they refine over decades to deal with exactly this.
Winning is easy. Losing… now that’s the special sauce.
And the truth is, your answer will change. It will change based on your circumstances, the amounts and the timing. To start on your investing journey then, like setting out to get that downward dog pose nailed, requires repetition, a strategy, and an expectation of failure.
Once you set your mind to the pain of the gym, you are much better able to progress and improve. The same is true with investing. It requires work, repetition, process and above all a fixed understanding that you will be wrong a lot.
I’ll cover data and processes next time.
You can read more articles by our Founder and CEO, along with the original article here.