Pabrai checklist investing money
Comment Synopsis To stay ahead in your investment journey and make optimal investment decisions, one should actively consider making an investment checklist ET Spotlight Life is really a series of lists. From shopping lists, to school holiday lists, to things to do lists, there are a vast number of lists that one makes. The thing is that lists keep your life on track. They ensure that you do not miss out on any important stuff and give you a peace of mind.
For all these reasons, an investment checklist is something that you should actively consider making, to improve your ability to make optimal investment decisions. Key takeaways: Human beings often make flawed decisions since they let their decisions get influenced by emotion. You can avoid many of these flawed decisions simply by becoming disciplined about the decision making process.
The solution lies in adopting a checklist approach. Any other mode of operation will cause him to miss much that is important. That has been created over years of failures that have caused things to make the checklist. Our investment checklist was designed the same way. When I look at mistakes, I would figure out what was the reason the investment lost money and was that reason visible at the outset? Was it visible before the investment was made.
And, in most cases it's extremely obvious. We think we're very smart; we take shortcuts, especially in investing. We get euphoric about all the money we're going to make, and we are just a mix of rationality and emotions. We see a great undervalued business, we ask ourselves a bunch of questions, but we don't go through a systematic process of looking at every nook and cranny to figure out whether we got it right or not. Not Rocket Science.
Pretty obvious. Examine all your mistakes that led to permanent loss of capital — the plane crashed. Add to the checklist. I go through all the checklist. Every item on our checklist is meant to remind us of previous lessons learned and expose any biases we may have on a particular investment. My list was copied from the famed checklist the Federal Aviation Administration mandates to keep airline crashes to a minimum.
It is one of those things where it doesn't take much effort, but delivers a huge reward, and I like that. These two very simple tools not only will help keep people focused on their goals and sticking with their strategy, but they will also help them avoid mistakes out of impulse. They will also protect investors from some of the cognitive biases to which we are all subject.
This allows the investor to check with him or herself and to think about whether there are forces at play that may be activating some cognitive biases, and if so, to consider those.
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