Two Simple Changes To My Routine Made Me A Much Better Investor by Andrew Hunt, author Better Value Investing: A Simple Guide to Improving Your Results as a Value Investor, full bio below
As Charlie Munger and Howard Marks have recently lamented, “Investing is not supposed to be easy. Anyone who finds it easy is stupid.” Few seasoned investors would dispute this; however there are simple things which can make the difficult task of successful investing easier.
One of the areas I’ve been focusing on recently is my daily routine. Daily routines tend to evolve by default rather than careful design. This can make them exhausting, as you’re left leaping from one disparate task to another while juggling dozens of distractions along the way. That exhaustion can, in turn, impair decision-making.
With careful thought and self-observation, I think it is possible to build better routines over time that will ultimately lead to better investing. With a New Year coming up, now is a great time to rethink your daily routine and experiment with new ways of organizing your time.
Here are two simple ideas I have found to be especially effective:
- Split your day in two
There are really two parts to my job. Firstly, there’s what I call the important stuff. This involves appraising potential investments and revisiting existing holdings. Additionally, I often set aside time to go over mistakes or do some reading and researching with a view to improving my investment process.
But then there’s lots of other stuff too. These are the day-to-day chores that come up and often get in the way of the important stuff. It’s things like emails, meetings, admin, keeping on top of news-flow and so on.
Unfortunately it’s very easy for the other stuff to end up eating through the whole day, or at least distracting you from the important stuff. Who hasn’t found themselves compulsively checking emails, reading inordinate amounts of (mostly irrelevant) news or just playing around on Bloomberg for hours?
It was with this in mind that I had the idea of cutting my day in two.
Now, before 10am, I check my portfolio, read news and updates, check emails and organize any meetings.
Then I have an hour away from my desk. This period acts as a barrier between the other stuff and the important stuff. During this hour, I find a quiet place to do some reading that is not directly to do with investing (such as business biographies, self-help books or watching TED talks), followed by a little thinking time and then finishing with ten minutes of meditation.
This leaves me settled and focused, ready to spend the rest of my day on the important stuff. After a few months, I’m amazed at how much this one change has improved my productivity and focus.
- Plan your time before trading really carefully
After all the work done researching and monitoring opportunities, it’s easy to slip into autopilot by the time you finally get round to actually placing a buy or sell order. That may be a missed opportunity. As a long term investor, I’m looking to make a small number of very good decisions that will stand me in good stead for years to come. Whether I deal at 3pm or 4pm does not really matter.
Lots of psychological experiments have shown that people tend to make better decisions when they slow their decision-making right down; especially by introducing pause points into the process. A pause point is basically where you stop and take a bit of time out to reconsider the decision you’re about to make and how you got there.
This insight has led me to really focus on how I spend the time before actually placing a deal. When I decide to place a deal, I now have a self-imposed pause point lasting at least one hour. During this hour I work through a checklist, re-checking the most important financial metrics, and the basics of the investment case. I also consider how I want to scale the purchase or sale and the type of order I want to use.
The time before dealing is exceptionally valuable. It’s your last chance to re-check all the basics – to make sure you have not omitted anything and that you have followed your process. Using this time well can make all the difference. I’ve found over and over again that when I’ve changed my mind during this hour, it’s been the right thing to do.
Taken together these two simple changes have made my work less stressful and less tiring, while greatly improving my ability to stay focused and to follow a disciplined framework.
Andrew Hunt is a portfolio manager with one of the UK's leading investment managers. His new book, "Better Value Investing: A Simple Guide to Improving Your Results as a Value Investor" is available from Amazon.com and in good bookshops