One of the most important skills that any nurse acquires over their career is the ability to self-reflect on their own practice. This might include such things as individual clinical skills, patient care or interactions with clients/colleagues in a variety of settings. I have the strong belief that self-reflection is also an integral part of any successful investing strategy because of the important role it plays in assessing both success and failure. Doing what you do best is not only finding something that you excel at in any individual or group effort, but how you critically evaluate those opportunities in order to gain better insight into what you did right or wrong.
One of my most significant lessons was back in early 2000 while I was attending WLU in my first year of business. Each year from early October to early December the school, along with key business partners (TSX, National Post, Sun Microsystems, etc), holds a competition for first year students to test their skills in a stock market competition. Prizes in the past included cash rewards for the top tier students at the end of the competition who succeeded in accumulating the largest pool of capital after initially starting with a small amount. Each student started then with $10,000 (I believe it was $50K this year) and is required to make a certain number of trades by specific dates in order to keep the playing field fair and objective. There are trading costs, an ability to go short or long the market and an ability to purchase different securities.
I entered the competition with my fellow classmates and using what investing knowledge I had accumulated up until that point I felt fairly confident in my chances. Alright, I was cocky…but many students had limited experience investing directly in securities up until that point and having dealt with money for a large portion of my adolescent life, I felt able to make a strong statement about my stock picking skills. I made significant progress in only the first 30 days, easily moving up into the top 10. If memory serves me right I was just out of third place when some instability…ok a lot, began to creep into the markets. I was overly confident and clearly didn’t understand the nature of the true environment we were in especially with over 70% of my positions at one point in RIM. By the end of the competition in early December I had fallen into 170th with my portfolio largely of RIM hammered down almost 58% in the span of 2 weeks. I literally went from a hypothetical portfolio of just over $124,000 down to less than $75,000 in just over 8 days.
I learnt an important lesson from that experience that humbled my approach to investing significantly for the rest of my life. Up until then, I thought street smarts were enough to get me through something that appeared at first to be child’s play, only to realize the significance of real investing. What if any or all of that had been my own hard earned money? Add to all this the experience of failure through embarrassment by my peers and I promised myself that for next few years I would dedicate time to gaining as much sensible knowledge as I could accumulate about investing in order to train myself to never fall prey to such thinking again. The Value Rules were born from that experience and along the way more were added as key mentors played pivotal roles over the years providing invaluable guidance through the potential they saw. I kept to successfully investing in mutual funds until May of 2006 when I was finally ready to bring my developed skills, assessment and common sense approach to something more than just investing on paper. It was unnerving at first because this time it was my own money vs. a hypothetical portfolio of invested securities. But I had faith in the approach I had developed with guidance and knew that mistakes would be made along the way, but by examining each decision with an unbiased list of rules I would stand a much better chance of success.
At times it’s realizing not what you do well, but what you do poorly that helps to make you a better investor. It’s easy for me or anyone else to give advice on patience, strategy and a willingness to examine your approach before making any trade. The toughest part is examining your own habits, tendencies and flaws in order to improve and ultimately make fewer mistakes over a long period of time. Mistakes not only hurt your earning potential, but have the ability to reduce your capital and earning power. Mistakes will still occur – it’s naïve to think that you’ll perform perfectly in any environment with any discipline. But minimizing the impact or severity of those mistakes will go a long way to increasing your successes and decreasing your failures.
A wise investor once shared with me that some of the most successful investors are individuals who are quiet, humble and take time in talking more about their abundant failures than infrequent triumphs. Sometimes the true value of a portfolio never needs to be revealed because our words speak louder than our actions. It makes no difference to others whether this investor manages a few thousand or a few million because it’s not the quantity of the wealth, advice and guidance that’s important, but the quality of those three items.
