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Quiet Reflection Is Important for Our Investment Process

It’s important to focus on having the right investment processes in place rather than be too fixated on the outcomes. Investors should strive to cultivate the correct mindset for investing and to curate and refine their process as they learn more over time.

The essence of quiet reflection is that it allows us time to sit quietly and ruminate over mistakes made, or actions that could have had a better result. Without reflection, an investor might never pause to think about how he can improve his techniques in order to achieve an optimal result. I will highlight some benefits I myself am able to enjoy through quiet reflection, and how it brings me closer to my investment goals.

Reflect on mistakes made

The first things I reflect on when I have some quiet time are the mistakes I’ve made. This is a constant reminder to myself that I am fallible and that I should always be mindful of committing silly errors. Even after documenting my mistakes and reviewing them periodically, I realise that it’s a human tendency to fall back to our old ways.

Reflecting on past mistakes also serves as a sanity check for our current portfolio: Am I guilty of a similar mistake? Could I have missed something here, like I did previously? Is there something else I should look out for in order to avoid complacency?

Reflect on psychology and emotions

Investing is filled with emotion, as money and ego are inextricably tied to it. Therefore, it makes sense to sit back and reflect on our psychology and emotions when carrying out transactions or thinking about what our next move should be. This need not be limited to how we feel about specific transactions (i.e., buy or sell ideas), but it should be extended to cover the range of emotions we feel when various events unfold.

For example, I go on an emotional roller-coaster ride when a stock I’m monitoring but have not bought shoots through the roof. It makes me question why I hesitated, and the stinging feeling of regret stays with me throughout the day. When a friend brags about his large profits, I also document my feelings and reaction as they may trigger envy, which may then lead me down the wrong path.

Reflect on how to improve one’s investment process

Finally, we should always take time to reflect on how we can improve our own investment process. This is an iterative process that takes time and effort, and the aim is to make the process more robust and foolproof. Everyone starts out with a clean slate, and as time goes by, we slowly learn about our own character flaws, which then drives our investment philosophy and process. I find that it really helps for me to sit quietly and think about how I could do better — in terms of deployment of capital, position sizing, and also the assessment of risk-return.

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The information provided is for general information purposes only and is not intended to be personalised investment or financial advice.