As investors, it’s important to find someone who will keep you accountable in the decisions you make (and don’t make) along the way.
Yesterday, I was listening to a wonderful audiobook called Thinking in Bets, by decision-making expert and professional poker player, Annie Duke.
One of the things that stood out to me was the idea of forming a truth seeking pod.
Essentially a group of people who can look at your decisions and outcomes, and pull apart ways you could have gone better or where you just got lucky.
We might think of ourselves as open-minded and capable of updating our beliefs based on new information, but the research conclusively shows otherwise. Instead of altering our beliefs to fit new information, we do the opposite, altering our interpretation of that information to fit our beliefs.
Annie Duke
This is important because often we attribute our misfortune to bad luck and our success to our skills, which isn’t the lesson we want reinforced, especially when it comes to investing.
Not only do we need someone to act as a sounding board when we make investment decisions, we need someone to keep us accountable when we stray from the rules we set for ourselves.
In a past episode of The Australian Finance Podcast, Owen and I spoke about writing down your personal investment guidelines, which could potentially look something like this:
- I will not invest in something I don’t understand
- I will not sell a share based off one news article
- I will put aside a 6-month emergency fund so I won’t be forced to sell during a market downturn
- I will treat a market crash as a sale
- I will consistently invest $X every second month on the 15th
- I will not invest in anything with a short-term investment case
- I will only invest in companies that align with my values
Well, that’s certainly an ambitious list, and one even I would have difficulty sticking to.
But the point is, once you identify your own investment approach and guidelines, you need someone to hold you accountable to them. There’s no point putting this great plan in place if you keep repeating old behaviours and making the same mistakes.
Identifying a negative outcome doesn’t have the same personal sting if you turn it into a positive by finding things to learn from it. You don’t have to be on the defensive side of every negative outcome because you can recognize, in addition to things you can improve, things you did well and things outside your control. You realize that not knowing is okay.
-Annie Duke
So that’s where an accountability partner comes in.
So, who should this accountability partner be?
Well firstly, you want someone who’s prepared to call you out on your melodrama and pick up when your so-called “good decisions” are a product of good luck, rather than your god given gifts.
Secondly, you’re going to need to be honest with this person. They can hardly hold you to account, if you don’t tell them about your decisions, both good and bad.
Finally, it helps if they know a little bit about investing, even better, they’re willing to learn alongside you!
Whether this person is your partner, sister, friend from high school or that dude that works in IT, finding a handful of people to act as your accountability partners (your very own truth pod), is an important step in improving your decision-making skills and becoming a better investor.
Well … at least it has for me.