What does it take to be a successful investor? A healthy balance of technical skills, emotional intelligence, and conscious habits will help. This three-legged stool requires that we derive precision from knowledge and evaluation and perspective from curiosity and discipline, while developing processes that lead us to succeed in our full potential.
The investment community is consistently searching for latest tools to make this vital process easier. But as technology across the financial world has advanced exponentially lately, probably the most useful investment tools has been around for millennia: writing.
Clear writing and clear pondering go hand in hand. While the exercise could appear trivial, articulating our ideas through words on a page moderately than simply in our heads is an insightful experiment: our views may start the identical, but often materialize otherwise. That’s because writing encourages us to decelerate, calibrate our thoughts, and test the true health of our ideas.
Could writing be probably the most underrated investment skill? I feel so. In fact, writing should play an energetic role throughout the investment process. Here’s why.
1. Writing reveals what we all know and what we understand.
It is all too easy to imagine that we fully understand a selected investment theme. Because we eat information throughout the day, it’s difficult to evaluate its broader impact as we’re bombarded with news after news. Instead of being critical thinkers, we frequently turn into “headline experts,” repeating memorable facts without deeper awareness. We may know many things, but understand far less.
Geopolitics is a major example. War, public health, natural disasters, trade policy, climate and elections, and other issues attract no shortage of attention. Our natural tendency is to dive into topics as they arise to learn as much as possible, assess potential investment implications and adapt.
The urge to “do something” often drives the investing community on a frantic quest to turn into experts on extraordinarily complex topics. While being properly informed is a noble goal, we needs to be careful when balancing our understanding of a subject with the conviction with which we approach our investment strategy.
Writing helps us close this gap and find our blind spots more quickly.
2. Writing boosts self-confidence.
While the quantitative side of investing is an enormous challenge, the emotional hurdles are sometimes much higher. Self-awareness is crucial if we would like to acknowledge our biases and keep our emotions under control. A sound investment process systematically features a series of checks and balances that optimize our decision-making. But seeing exactly where and the way we will improve requires a further perspective.
In other words: Without a mirror, we won’t at all times tell if something is stuck in our teeth. Writing serves as that mirror, reflecting how we predict within the moment and over time. It creates a healthy emotional distance from ourselves, helping us turn into more objective and ensure our beliefs—and, if mandatory, floss.
3. Writing improves our ability to tell apart insights from noise.
Writing promotes healthy investment research habits. It sharpens our “insight-noise filter” by utilizing a conscious framework to discover helpful information.
As an all-too-simple example, consider the mid-year headlines of 2023, which have fun a remarkably strong begin to the yr for the S&P 500. “Stocks are doing great” could be an easy conclusion. But were they? Only seven firms accounted for nearly all of the increases. The average stock had barely moved. Therefore, the underlying mechanisms of a difficulty are sometimes rather more nuanced than what appears on the surface.
A straightforward written prompt describing the health of the stock market would have quickly provided context.
4. The letter serves as a “tracking aid” for our investment process.
When we do not keep our eyes on the road, drivers and investors alike usually tend to veer off beam. It’s all too easy for warm topics to quietly steer us away from the disciplined course we have set for these very situations. Because even the very best investment process is just as effective as we follow it.
In May 2023, a looming “US debt crisis” sparked fears that the Treasury would default by itself debt, sending the worldwide economy right into a tailspin. News networks devoted entire segments to assessing the likelihood of cooperation between the varied factions in Washington, D.C., based on the each day schedules of political figures. For weeks, major headlines highlighted widespread fear of systemic risks. This time it could be different, despite the fact that the debt ceiling had been raised 77 times since 1960. It was understandably difficult to maintain track.
But writing helps us focus our process when it matters most. Structuring intentional prompts as we take into consideration latest topics gives us a checklist to make sure we see more clearly. Additionally, writing helps us proofread our own ideas and serves as our own second opinion.
5. Writing provides information concerning the quality of our decisions.
Performance results alone usually are not enough to evaluate the true quality of our investment decisions. Was our evaluation sound? Did the outcomes occur for the explanations we expected? Were we right or lucky? Wrong or bad luck? Without considering the input, we’re unable to evaluate the output. More importantly, by focusing only on outcomes, we ignore the training opportunities that may collectively improve the longer-term impact we would like to realize.
Hindsight could also be 20/20, however the memory of how we actually thought and felt at any given time limit could be blurry – unless we now have a process in place to document it. Writing helps us capture these moments more consciously. It creates a time capsule of feedback that gives deeper context and accelerates our ever-evolving learning curves.
So how do I start?
As an investment, writing is well price its J-curve. As with any fitness program, patience and energy help construct writing muscles. Here are some ways to start:
- Start small.
- Consider the timing.
- Align length with purpose.
- Pay attention to your emotions.
- Check frequently.
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Photo credit: ©Getty Images / ilkercelik
