10 Ways to Improve Your Investment Process – #7. Manage Yourself

The seventh idea to improve your investment process is to manage yourself.  I want to focus on three components of self-management: management of cognitive biases, management of your time and management of your work ethic.

We all have certain quirks in our mental wiring that impair our judgment. Behavioral scientists calls these cognitive biases.

They include being overly confident in our abilities, giving too much importance to recent events, and discounting information that runs counter to our beliefs. They influence us on a subconscious level and geniuses are not excluded.

The problem is that they lead to irrational and costly decisions.

If you want to avoid these errors, you need to understand these quirks and take precautions. Following Munger, I recommend making a checklist of the these misjudgments and studying it. You can then run it down when you’re making an important decision.

You could also collect the best books and articles on the subject and make their study a serious part of your professional development.

The second element of self-management is time management.

Time is arguably an investor’s scarcest resource. There is always something to do, along with unlimited distractions and interruptions.

A successful investor must become a master of his or her time. Having a well defined process is half the battle because it gives you a tool to say NO to things that don’t serve your objectives.

Fortunately, there are a number of good tools available to help you manage your time. Two I like are Getting Things Done by David Allen and The Pomodoro Technique by Francesco Cirillo.

Getting Things Done gives you a robust process for managing your tasks and projects. It uses checklists to manage everything from what to do now to thinking about your career over the next five years.

The Pomodoro Technique gives you a simple approach to remain focused by doing your work in pre-planned 25-minute chunks, where you work hard at managing interruptions.

The Pomodoro Technique also allows you to track your time so you’ll know how it’s really used. Self delusion is not a useful component of a winning investment process.

The third element of self-management is managing your work ethic.

Woody Hayes said, “I’ve had smarter people around me all my life, but I haven’t run into one yet that can outwork me. And if they can’t outwork you, then smarts aren’t going to do them much good. That’s just way it is.”

Alice Schroder credits much of Warren Buffett’s success to his work ethic. When digging into Buffett’s life, Schroder found no holy grail; rather, she found an intelligent man who worked very hard.

Improve your management of your cognitive biases, your time and your work ethic, and you’ll improve your investment results.

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One thought on “10 Ways to Improve Your Investment Process – #7. Manage Yourself

  1. Jim Allen

    That is what struck me about Alice Schroeder’s book, too.

    You see it in almost all the great performers, the intensity, the single minded pursuit, almost as if they do it, not because they can, but because they have to. They sacrifice other aspects of life, being a Little League coach, fishing, stamp collecting, Lion’s Club type stuff sometimes. They are never discouraged by the inevitable set backs, which are merely learning experiences.

    This intensity is most often seen in artists, musicians, and athletes. A professional musician doesn’t just practice until he gets it right, but until he can’t get it wrong. Athletes like Tony Gwynne, Drew Brees to name just two, are the first to arrive and the last to leave practice, all the time. Talent may make it easier, but you still have to perfect it.

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