My Experience with My Investing Decision Journal
Memory is such a fascinating thing. An organism's ability to acquire, retain, process and retrieve information but we can only keep track of so much at once. As humans, we also have the potential to warp our memories to fit a narrative, such as our internal dialogues about a previous relationship, a specific school teacher, or even a stock that we purchased. I would say a large opportunity for my personal development is keeping track of my thoughts in real time, which has led me to keep a Decision Journal. For me, the decision journal is a place I can keep track of my expectations for the business, my thoughts on the current risks and why I think this opportunity exists.
Over the years, I have tried a few different ways to keep track of my thoughts. I, initially, started by just putting my thoughts inside a word document. I, however, found this was a pain to keep opening the document and checking what I thought at the time. Keep in mind that many of my word documents are now over 100 pages long so it wasn’t easy to see what I thought of a specific company 2-3 years ago. Sometimes there are material quarters that really make or break the thesis and other times, there is just observing. I wasn’t sure how to divide the document by company and how to treat companies that I no longer owned. Plus, if there was anything wrong with my internet connection or I had problems syncing to the cloud, I couldn’t update when I wanted to.
I, eventually, switched to having a dedicated word document for each company that is broken into quarterly updates and major company reports or events. I write a few summary sentences on the reports and my general thoughts on the company. This solved the issue of looking up my thoughts for a specific company but I still struggled with being able to quickly see the weighting of a whole company and find precise entries and past thoughts.
After a while, I went backwards and decided to use less technology. For the longest time I used a paper journal that I got at the Dollarstore. This was dedicated to nothing but keeping track of my thoughts when I bought or sold. As I went through one, I would just start another. I would use colored tabs as bookmarks for specific companies. I found this very clunky to go back and look at my thoughts, but it took away so many distractions with being “online” and I could write any time of day and at any location. I also wasn’t great at keeping track of companies I would pass on.
Recently I switched to Journalytic. It’s great. I like how you can set reminders, record a decision, use tags, and easily reference your decision on a specific company. As with most software, I only use something like 20-30% of its full capabilities so I am sure there are still many other features I am not utilizing.
There are 4 different distinct ways I interact with my decision journal.
1) When researching a new company
After I do my research on a company, I will document my decision to buy or pass on the idea. I will lay out my reason for purchasing and the various risks. If it’s a company that I pass on, I will explain why I passed. For me it’s important to list out how I expect the business to perform and what I think the stock will do.
This isn’t a full blown research report going into detail on all the company specifics. It’s just a paragraph or two on why I made my decision.
2) When updating a current position or keeping tabs on a company on my watchlist.
These would be the more “natural” times to update, such as every quarter reporting period, when the company releases something it deems material or if I discover something I think is important. I will put my thoughts down in the journal regardless of it being good or bad news. I’ll list out what I think of the development and if I am changing my position.
3) Overall portfolio performance and thoughts
Each quarter I do a quick update on what my thoughts are on my portfolio and the markets overall. This allows me to capture what was topical at the time and what I was worried about. I also like keeping up to date on what the sentiment is at the time.
As a side note, this is really interesting to see what the narrative regarding the market was at the time and if it came true (spoiler alert, it usually doesn’t). I like to keep up with the current narrative of the market participants as well. At this point in time, it would be around AI and the picks and shovels. It’s also fascinating to be able to look back and see what the “hottest” stock was at the time.
4) When it becomes a specific % of my portfolio.
I don’t have hard and fast rules with position sizing. Things generally start at 5%, and 10% for high conviction ideas but I break those rules and will go to 15-20% initially. Based on my initial position size, the share price movement can trigger me to record my thoughts. The bet I’m making today isn’t the same as tomorrow (that’s a lesson for another day). For example, if a company starts as a 5% position and grows to 10%, that triggers me to reassess the holding and decide if it warrants a 10% position or not. Same if it goes from a 10% to a 5% position. Before mindlessly averaging down, I try to take a step back and put down my reasons for adding.
Closing Thoughts
I would be remiss if I didn’t tell you how regular journaling has also helped me with the parts of my life outside investing. Journaling has helped me to see what worried me in the past and what worries me today are often different. I am also able to reflect on how I managed challenges, some of which felt so big but most times ended up being quite manageable. Within investing, journaling has provided me with a better feedback loop and has allowed me to gain a larger perspective on my own decision making, how it can change and narrow down what kind of investor I truly am.
I would love to hear how you record your decisions. Do you keep a journal? Is it more detailed than mine? Do you journal outside of investing? What are some key lessons journaling may have provided you? Let me know in the comments. Additionally if you have a team of people, how do you instruct them to record decisions?
Thanks for reading.
Dean