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Learn to Fail Better

Published on 24/06/2021

In recent months, Upside has been teaming with one of our users, a Singapore-based Portfolio Manager named ATEC who has been sharing thoughts and highlights from their investing research. They cover everything from individual stock names and industries, as well as regulation and the investing landscape.

In this week’s blog, we wanted to showcase a recent article they wrote. You can find further articles and follow ATEC on our Medium Blog.

………

One of the most invaluable lessons ATEC has learnt over years of trading the markets is perhaps one that does not attract sufficient attention in the investment industry today. Learning how to fail better.

Let me explain.

Every investor, no matter how proficient, makes mistakes at least 50% of the time. Whether it is down to wrong assumptions, wrong timing, or wrong sizing - mistakes are as inevitable as night and day.

What is unfortunate, however, is that the reflex reaction of fund managers towards their analysts and to immediately lay blame when mistakes occur. This does not promote growth. This only serves to dent confidence, and in the worst case, disillusionment. Some of us might even attempt to forget about it and move on.

Instead, ATEC finds it more constructive, when mistakes are made, for the investor/trader to have an honest conversation with themself:
"Where did I go wrong with this trade?"
"How could I have spotted this before the move?"
"How can I ensure I will spot it in the future?"
"How can I adjust my approach from here to avoid repeating it?"

ATEC finds themself asking these questions… well… all the time. ATEC believes the process will eventually lead to better style evolution or, at least help to develop discipline which over time should serve to reduce/lessen the losses that are taken.

Hence, learning to be better at failing.

As an aside, compare the number of times you have read or heard from investors talking about how good their trades were versus those mentioning their bad trades and the lessons learnt?

We might be open to using data analytics to measure our performance and style from different angles - perhaps by using Upside’s proprietary analytics technology - but at the end of the day, we should be asking more of these questions to understand our own biases and ultimately, improve as investors.

Hence, the next time we make a bad trade, try going through the simple thought process. The markets are ever-evolving, so why shouldn't we?

Review. Reflect. Refine.

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