Learning from investment mistakes

Source: Capitalideasonline

In a great book “Lessons from the Legends of Wall Street”, the author, Nikki Ross, writes about the importance of learning from investment mistakes.

“Investment mistakes should be used as a learning experience,” according to Fisher. “Investors should reflect on their mistakes-the thorns-rather than thinking or talking only about their winners – ­the roses. The focus is not on the fact that mistakes have been made, some are inevitable. What matters is that you can learn something from them.”

Fisher says that he made mistakes purchasing three different stocks, with long intervals between each, because he did not follow his investigative process as closely as he usually does. Looking back on this, Fisher feels that had he investigated more thoroughly, he would have uncovered in10rmation to stop him from making these investments.

Misjudging the quality of management is another reason Fisher gives for mistakes. He explains: “The reason for my big successes is that management of the companies involved had unusual ingenuity, outstanding policies, and basic business ability. Sometimes executives appear to have these traits, but they do not have the ability to execute them. These factors can only be determined over time.” This is the area in which some of Fisher’s mistakes have occurred, even though the net loss has been very small. Although he has made errors in judgment, Fisher remarks, “I am grateful to the managers who spent time with me prior to and during the time I owned their stocks.” The final reason he cites for his mistakes is due to deceit or concealment by management, which occurred in very few cases. Fisher says that his total losses have been insignificant in relation to the large gains made from stocks of companies he has held for many years.”

Click here for the full article.

Additional Readings:

Additional Reports:
Off-Topic Readings:
Parting Thought:
  • Investing in a market where people believe in efficiency is like playing bridge with someone who has been told it doesn’t do any good to look at the cards. – Warren Buffett
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