This Template Can Fine-Tune Your 2023 Investing Strategy

This Template Can Fine-Tune Your 2023 Investing Strategy
Stéphane Renevier, CFA

about 1 year ago2 mins

The end of the year usually makes us reflect on life and form (often too) ambitious resolutions for the coming year. But forget about hitting the gym three times a week or calling your grandma more often: here’s how you can bring your investment game up to the next level.

Start by identifying the three most important strengths and weaknesses of your current investment process. That includes how you come up with ideas, execute them, track them, and analyze your performance. Take a few minutes to reflect and write down three points for each in your chart. For me, I see strengths in my data-driven approach (which reduces my behavioral bias), and my focus on risk management (which allows my gains to be much bigger than my losses, and means I can be right only half the time and still make money). But in terms of weaknesses, my process is sometimes too strict and too conservative, meaning I miss out on many opportunities. You might be good at identifying good investment ideas, but not so good at constructing your portfolio or knowing when to sell, for example.

Next up is your psychology, which trading expert Dr. Van Tharp believes makes up about 60% of your investment performance. Spend a few minutes thinking about your past mistakes, and identify the top strengths and weaknesses of your own psychology. For me, I’m good at thinking independently, but tend to have a bias toward being overly contrarian. You might be decisive (that’s good), but over-confident (that’s not so good), let’s say.

Finally, come up with two clear goals that will allow you to play to your strengths, and two goals that aim to reduce your weaknesses over the coming year. For example, you could start keeping a weekly investment journal, and consider it a success if you only miss more than, say, five weeks next year. Or you could aim to read a book about behavioral finance, and share your summary with our community. And hey, don’t worry too much about getting it all completely right: simply identifying any strengths and weaknesses should bring you one step closer to being a better investor.

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Disclaimer: These articles are provided for information purposes only. Occasionally, an opinion about whether to buy or sell a specific investment may be provided. The content is not intended to be a personal recommendation to buy or sell any financial instrument or product, or to adopt any investment strategy as it is not provided based on an assessment of your investing knowledge and experience, your financial situation or your investment objectives. The value of your investments, and the income derived from them, may go down as well as up. You may not get back all the money that you invest. The investments referred to in this article may not be suitable for all investors, and if in doubt, an investor should seek advice from a qualified investment advisor.

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