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Here’s How You Can Simplify the Way You Invest

To many, investing is a complicated affair. It might involve numerous spreadsheets, some complex graphs, and a whole lot of numbers.

But it doesn’t have to be this way. Investing can be kept uncomplicated too.

One way is to simplify the way we invest.

Take the humble notebook. It’s easy enough for anyone to get a little book that slips into our hip pocket and yet, it can be the most important thing in an investor’s toolkit. But that’s only if we put it to good use.

If we come across a business that looks interesting, we can use our notebook to record our thoughts. We can write down the reasons why we like the business and the growth potentials that we can see. We can also jot down the potential risks that might derail the business. If we want, we can even record the stock price and valuation numbers.

Writing down our thoughts about a business is about as simple as it gets. But it turns out that the act of documenting our thoughts is also crucial if we want to be good at investing.

Let me explain.

I’ll lie for you (and that’s the truth) 

As humans, we are not very good at remembering things. That’s the sad truth.

When a business reports a poor set of results, we will try to convince ourselves that we saw the bad news coming. And when a company performs better than expected – well, we knew it all along, of course.

But why does this happen? Author and financial journalist, Jason Zweig, explains the phenomenon in his book, Your Money and Your Brain:

“Your memories, then, are not just recollections.”

They are also reconstructions. That helps explain why you learn so scantily from your own experience. Your memory of what was is shaped largely by what is.”

Most of the time, Zweig argues, we tend to create our own memories based on how we are feeling at present, and not based on what actually happened. This behaviour can impede our learning process, as we will not know if our investing gains were made because we made good decisions, or because we just got lucky.

This is where the trusty notebook comes in. The notes in our little book will keep us honest.

If a business does well, we should check back on our original investment thesis to see if the performance is due to business strengths that we initially saw.

Conversely, if a business falters, we would want to know if we were aware of the risks from the start. These reflections can help us better identify the strengths and weaknesses of a business.

By keep track of our thoughts, we can make better investing decisions in the future.

Another way that you can simplify it is to have someone do all the hard work for you. At The Motley Fool Singapore's premium stock recommendation service, Stock Advisor Singapore, we provide comprehensive reports for each and every stock we recommend.

These reports could serve as the notes on a company's strengths and weaknesses that I have mentioned earlier, and help make you a better investor - in addition to providing you with great investing ideas!

The information provided is for general information purposes only and is not intended to be personalised investment or financial advice. Motley Fool Singapore contributor Chin Hui Leong doesn’t own shares in any companies mentioned.