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Are you a Good Investor?

The only way to answer the question is to look at your performance. Are the choices you are making as an investor having the right impact on your portfolio? Are you accountable for every decision you make, specially when things don’t go as planned? A good investor sets goals and holds herself accountable because this isn’t a fake-it-until-you-make-it game. If you get it wrong, you lose money. It’s that simple. So learning from your mistakes is a critical part of becoming a good investor.

Things usually go wrong because investors tend to focus on the upside, while ignoring downside risks. Generally speaking, blind optimism and enthusiasm are tolerable emotions, but they have no place in portfolio management. What we need instead is a great deal of focus and a thorough understanding of risk. Never gamble with your money.

The first rule of investing is to never lose money. These are Warren Buffet’s words, but it is easier said than done. Even the pros forget that capital preservation is everything, which is why spectacular blow ups like THIS are such great reminders of what ignorance and hubris can do. How irresponsible do you have to be to wipe out an entire fund on a single trade? But it happens more often than you think when markets turn unexpectedly. So the moral of the story is DON’T BE THIS GUY. Understand risk, make a plan, and stick to it. And remember, intentions don’t count. Only outcomes.

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