Thursday, March 02, 2006

Scrapbook Your Investment Ideas

One thing that I've done in the past as an investor that's lowered my returns has been to flit around from stock to stock whenever I come across a "good idea". This has dampened my returns, since I haven't had the full patience to wait for my other good ideas to come to proper fruition (ie waited for the market to properly value them) and I haven't considered those ideas within the context of other investment ideas that seemed profitable.

I've now worked out something that works much better for me, and it just might for you too.

And that's to toss all these ideas into the equivalent of a scrapbook, with a couple of notes about where you came across the idea, what seems so good about it, and anything else you happen to have on had about it. Now, unless it offers an absolutely stunning value opportunity to be exploited immediately - then you can just sit on it for a bit, and wait.

Then, every couple of months, you can go through your accumulated ideas, perhaps examine some basic valuation metrics on it, and see how it might blend into your investment portfolio to date. Make sure you ask yourself a few questions about it - but you also get the opportunity to compare it to your other "bright ideas" and at least consider the risk/value issue in a broader context - ie other opportunities you're actively considering.

I almost guarantee that this sort of activity will lower your trading profile and increase your returns, unless your portfolio suffers from comatose activity, in which case I believe it will then both increase your trading and your returns.

A beneficial activity in either case: scrapbooking - it's NOT just for the bored housewife anymore!


JW

The Confused Capitalist

2 comments:

Sivaram Velauthapillai said...

Excellent point. I've been doing something similar but your idea makes me think that I should formalize it by writing down some concrete details. I think one of the big payoffs with your strategy is that you can re-visit an idea and re-evaluate the situation.

Although it sounds so simple and obvious, your idea is great...

Adventures In Money Making said...

good idea.

I was thinking of buying SA on a pullback.
this idea wasn't logged anywhere and I missed its recent action down to $22!