self-review

One of the things that has helped me the most in my investment journey is self-review. Not once or twice a year, but continuously. My usual investment routine consists of tracking all the latest developments around the world, in the stock market, in specific companies, look for interesting stories and then make calculated bets based on my experience. But anything that gets into a routine, be it life or investments, there is always a chance that you become robotic about it and start missing the finer details often getting off track. Good thing about stock market is that it punishes you as soon as you get off-track unlike life where you can be off track for several years before you realize it and it is often too late before you realize it. Life also punishes or rewards you sooner or later but it mostly works on accumulated debt settlement model, which is kind of irritating. Well I am not a life expert but let's talk about stock market where I do know a thing or two :)

Example explains things better
Recently I had taken a fancy to investing in holding companies that were de-merging their subsidiaries and providing free shares of the de-merged entity to the holding company shareholders as a value unlocking exercise. I made many such successful bets and went crazy on this strategy investing larger and larger amounts of money on every new opportunity making bolder and bolder bets. What can go wrong? I have already made several successful investments on this theme. I was accumulating large quantities of one such company after it came up with a de-merger announcement. For me the rationale was simple, de-merger = value unlocking = profits and hence go blind and big on it. This particular stock soon reached the top investment rank in my portfolio without me realizing it since I was buying chunks of it every now and then. One weekend when I was just reviewing my portfolio casually, this company caught my attention on how it had become my top holding a bit too fast and at a fairly high price compared to what I would normally pay for a company like this. I started thinking about it. Just a blank thought, what am I doing here? I went through the de-merger scheme again trying to analyze the whole deal. What struck me was very interesting. The company was actually hiving off a very high debt, low return subsidiary into a separate company. The newly de-merged entity would be the kind of stock I would never invest my hard earned money into. What the heck? I don't want this de-merged entity at all and I am still pumping money continuously into it? The right strategy would have been to wait for the de-merger to take place and then invest in the parent entity that is left with the better business and has gotten rid of the high debt, low return business by hiving it off. I was doing exactly opposite of what I should be doing. Goes without saying, I took immediate corrective action and fixed it. But it was a narrow escape from a disastrous investment.

What saved me? 
A simple weekend review and a very simple question "why?"

After this experience, I have made it a practice to take a periodic break from routine and not do any investments during that period but just go through what I have, what I have been doing for the past few months, what I am trying to actually do and how. As you can see I have expanded the review exercise by adding lot more questions to it.

Does it help?

Everytime. No matter how many times I do it, every single time. Some of the best ideas have come to me during this review break period. It is never planned. I just take a break. Most of the time when I go on a break I don't even have a review agenda. Often I start with what do I want to review this time? Many times I don't have a clue for couple of days and I am just stuck on this thought. Surely something comes up sooner or later and that starts a chain reaction of review thoughts. I never go back to my investment routine unless and until I have a new thought process to work on or atleast confirm that what I am doing right now is a great idea and I want to scale it up big time. What can be better  than this? You get a break and you get great insights in your break time and you get to go back to your routine all fresh and excited with new ideas to implement. It's a yay moment ! Like taking a break on weekend and being excited about monday ! 

Can we apply this to life?

Like I say always, anything that is applicable to stock market, is applicable to life in general. I am no life expert but I do try it from time to time. Unfortunately, unlike stock markets I never get any bright ideas about life and have to go back to routine .. well maybe some day .. I might .. as long as I keep taking time off to review it ... 

So how are things going at your end ? :)

P.S just a warning .. self reviewing life can be a depressing exercise. Do it only if you can handle it :)