When we think about great investors, we tend to think of them as people who have great experience and move significant amount of capital on gut feeling that theoretically comes from experience.
You know… some old man sitting in front of large monitors (the more monitors he has, the more capital (monetary or political) he controls, right)?
I now have close to 10 years of professional experience in finance and was feeling that I have some experience under my belt to make some calls on gut feeling.
However, whenever I am discussing my ideas with my PM, she tells me this
“YOU JUST GOTTA STICK TO THE PROCESS – DO NOT LET YOUR BIASES COME INTO YOUR DECISION MAKING – WHAT DOES THE PROCESS TELL YOU?”
One time, we were looking at a stock – I know that the stock does not trade on EPS but sales. I mean it is generally perceived that no fast growing companies trade on earnings (crazy thinking but that is the current state of the market).
So I removed target price from P/E-based target price and conveniently it raised the target price!
She saw that and told me that that is my subconsciousness introducing my personal biases into the investment process.
Process made me a lot of trading profit the other day and it save me from losses today by preventing me to keep a long position on because I liked the company.
Do you have process in your investment process? Do you have process for your key life decisions?
Everyday I have a set routine and each routine activity makes me who I am.
I read book for 30 mins everyday
I work out for one hour everyday
Those routines are making me knowledgeable and healthier everyday.
I THINK THE SAME GOES FOR INVESTING
THESE ROUTINE INVESTMENT PROCESSES , by shear repetition, are making me a better investor.
With experience, I seek to improve the process and kick off a great virtuous cycle where the process makes me better, which makes me improve the process, and that process further improves me as an investor.
The little improvement everyday will add up to significant edge over time as they compound everyday.
Ask yourself now – do you have set written principles of investing that you strictly follow?
If not, today is the day you start writing down a checklist. Everyone has different checklist because everyone’s investing style is different.
I will share mine someday here.
Happy Investing!
I want to know Alex Denner’s investing process – he extracts a ton of value from under-managed companies and that’s something that is extremely difficult unless there is specific PROCESS.
