Sunday, April 30, 2006

Investing Mistakes

Mistakes teach you more than success, if you are willing to learn.
When I started off in investing back in 94, still in
college, I was very sure that if I make mistake now I would lose
thousands of rupees but if I made mistakes 20 years later I would
lose in crores because my total investment would be higher.
There was one logical problem in this line of thinking. If I
made mistake today and again the same mistake 20 years later, making
mistakes won't help. So I started of documenting the mistakes,
whenever it became apparent, in my diaries. I also gave unique error
code to the mistake and wrote a 2 page description to each
Some critical points in this documentation were the
circumstances under which I took the wrong decision. Please note
nobody takes wrong decisions. No decision is apparently wrong at the
time when it is made. It's only the information we lack, or
misinterpretation of current information that proves your decision
wrong over time. You would also note that in hindsight it looks so
clear but unless you consider the circumstances under which the
mistakes were made, you are doomed to repeat the same mistakes.

The results have been good so far. As per my unaudited records I
have made 87 UNIQUE mistakes and lost a total of Rs 4.5 lacs in
these mistakes. (You know the kind of games mind plays while
justifying the past decisions..I may not have documented all, surely
I haven't accounted for mistakes involving opportunity loss).

Another thing that I've noted that the number of mistakes kept on
reducing as the years progressed. The earlier one were more related
to incorrect valuations but the mistakes of recent years have been
in estimating the intangibles like brand value, honesty of
management, correctness of financial figures etc.

Posted: Aug 5, 2004

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