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Be Proud Of Your Investing Mistakes

If you have been investing for a while, you will realize something interesting about the endeavour: You will make mistakes.  However, you do not need to feel ashamed about it. Getting your investment thesis wrong or even losing money on some of your investments is just part and parcel of the game.

Peter Lynch, a legend in the investing business, once mentioned  that you do not need to be right all the time to be good at investing. For him, being right six out of ten times is already the mark of a great investor. So if making mistakes is a huge part of investing, how should we react to it?

The type of mistake

But first, what is a mistake? Many would assume that losing money in an investment is a mistake. But, there are times when you can be right about your investment thesis but still lose money on it. Similarly, there would be times when you are totally wrong about your investment thesis but yet end up profiting from it.

The latter situation has happened to me: I once made the mistake of investing in a fraudulent company (I thought the company was a misunderstood value share at that time) but I was still able to fortuitously profit from it.

The type of mistake I’m talking about here is committed when you’ve made an investment with a wrong thesis or when you’ve failed to fully understand the risks involved. For example, if an investor has invested in Sembcorp Marine Ltd (SGX: S51) simply because he thinks that the rig builder would benefit from ever-rising oil prices, he has made a mistake regardless of whether he has profited from the investment as oil prices have started falling recently.

No matter how careful we are, we will still make mistakes in our investing journey. That is why there is a need for us to diversify our portfolio. The act of diversifying would be able to help us mitigate the risk of concentrating too much in one investment.

Foolish Takeaway

At the end of it, mistakes are just part of the process when it comes to investing. So, be proud of your mistakes and do not be afraid to acknowledge them. Mistakes are really learning points for us.

Learn through your errors and see where you can improve regarding your investment process. As you study how you went wrong, you will see an opportunity to become a better investor.

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The information provided is for general information purposes only and is not intended to be personalised investment or financial advice. Motley Fool Singapore contributor Stanley Lim does not own any companies mentioned.