Keep a written log of your investing mistakes and reread it regularly, because your memory does not store your losses honestly, it edits them over time into something more forgivable than what actually happened.
I didn't believe this until I went back and reread notes I'd written years earlier about a position that went badly. My memory of that mistake was "the market moved against me." My notes, written the week it happened, said something much less flattering, that I'd ignored a warning sign I noticed at the time and talked myself past it. Memory had quietly edited the second sentence out of the story.
Why memory is the wrong place to keep this
It smooths things over, it protects your self-image, and it does this automatically, without your permission, which is exactly why you can't rely on it as your only record of what happened and why. A written entry, made close to the moment, doesn't have that motive. It just says what you actually thought, at the time you actually thought it.
What the log actually catches
The real value of a written mistake log isn't any single entry, it's what shows up when you read fifteen or twenty of them in a row. You start to notice the same handwriting on different mistakes. Maybe you keep buying on a story instead of a number. Maybe you keep holding too long past the point you privately knew it was over. No individual mistake teaches you that. The pattern across many of them does, and you only see the pattern if the record is honest and it's in writing.
The habit itself is simple. When something goes wrong, write down what you actually believed at the time, why you believed it, and what you'd do differently, before the memory of it has a chance to soften. Not a paragraph of self-flagellation. Just the facts, close to the moment, in your own words.
“You only have to do a very few things right in your life so long as you don't do too many things wrong.”· widely attributed
- Write the entry within days of the mistake, not months later once memory has had time to work on it.
- Record what you believed and why, not just what happened.
- Reread the whole log periodically, looking for repeats, not for individual entries to relitigate.
I've been doing this for years now, and the log is a little embarrassing to reread. That's kind of the point. If it doesn't sting a bit, you're probably not being honest in it.