Reflecting and opening your mistakes is such an important part of improving. I am aiming to have more humility with my investment decisions - I might have high conviction in the company, but I have only been doing this for a few years so to have high conviction in myself is probably overconfidence. Limiting position sizes, deciding when to sell, and avoiding adding to losers are the big goals for this year.
My biggest losses are from averaging down, so I’m also putting some rules in place to protect against that. I am setting an alert for a trailing 20% drop to initiate a thesis review - there is some research that a hard 20% sell rule improves outcomes, but I’m not convinced this translates well to small caps. I’m putting a 6 month block on being able to add to a position too to slow down the process and avoid rushed decisions.
I have also missed out on adding to winners because I struggle with the psychology of averaging up. I am going to be more disciplined in updating my thesis and valuation for existing holdings every 6 months to help identify when adding is the best allocation.
Hi JP, you have inspired me to post on SM about DCA. in summary i don't think there is a silver bullet. my strategy after a few decades of contemplating it, is only to double down on quality or i am completely certain why the market is wrong. answering the right question in this last case can be tricky here and the consequences of getting it wrong are very poor. the market is differentiating business progress markedly at eh micro end, not too sure if that will pass or the 2017-2021 was an outlier. hope all is well
Reflecting and opening your mistakes is such an important part of improving. I am aiming to have more humility with my investment decisions - I might have high conviction in the company, but I have only been doing this for a few years so to have high conviction in myself is probably overconfidence. Limiting position sizes, deciding when to sell, and avoiding adding to losers are the big goals for this year.
My biggest losses are from averaging down, so I’m also putting some rules in place to protect against that. I am setting an alert for a trailing 20% drop to initiate a thesis review - there is some research that a hard 20% sell rule improves outcomes, but I’m not convinced this translates well to small caps. I’m putting a 6 month block on being able to add to a position too to slow down the process and avoid rushed decisions.
I have also missed out on adding to winners because I struggle with the psychology of averaging up. I am going to be more disciplined in updating my thesis and valuation for existing holdings every 6 months to help identify when adding is the best allocation.
Hi JP, you have inspired me to post on SM about DCA. in summary i don't think there is a silver bullet. my strategy after a few decades of contemplating it, is only to double down on quality or i am completely certain why the market is wrong. answering the right question in this last case can be tricky here and the consequences of getting it wrong are very poor. the market is differentiating business progress markedly at eh micro end, not too sure if that will pass or the 2017-2021 was an outlier. hope all is well