An investment journal helps investors keep track of their decisions – whether it was a decision to buy, sell or do nothing. They come in many different forms and can include lots of different information, but the general purpose is so that you can review your past decisions and see what has historically worked for you, and if there is a pattern to your mistakes. This should help you improve your future performance.
Many investors keep journals in word, excel, as a blog, or even on paper. We have built an online investment journal that you can use for free to help keep track of your decisions, as well as your research on companies you are, or have been, interested in. Our website allows you to store your general notes on a company (e.g. what they do, how they make money etc.), track your individual decisions related to that company and the reasons behind them, and attach a checklist to each decision you make.
We believe using an investment journal can significantly improve your performance in several ways:
1. Forces You To Think Through Your Decisions
Nearly all investors will admit they have rushed into making an investment decision in the past: you haven’t taken the time to consider all angles, read enough around the company, look for red flags etc. and this has led to an investment that has lost money. We all like to think that we won’t repeat that mistake again, but unfortunately it appears to be part of human nature, and although we think we’ve learned our lesson, we almost certainly will do it again.
Using an investment journal and committing to writing in it before making a decision forces you to think through the decision and therefore makes you less likely to rush into buying something. We think an investing checklist is particularly useful for this, and so have included one as part our investment journal, that you can edit to meet you own criteria.
2. Helps You To Understand Your Mistakes
Often investors will make the same mistakes over and over again – whether it is investing in ‘blue sky’ companies, investing in sectors we don’t understand, or overpaying for something. However, it can be difficult to see the pattern in your mistakes if there is no record of them. Journal.Investments allows you to see which companies you have lost money on, and then view the decisions relating to those companies so that you can see if there is a similar pattern and work to avoid that mistake in the future (e.g. by accounting for it in your investing checklist).
3. Allows You To Quickly Refresh Your Memory
The same companies come up as investment opportunities time and time again, however there may be months or years between. Keep an investment journal means that you can quickly bring yourself back up to speed with the company (e.g. by reading your general notes on Journal.Investments) and also why you took the action that you did last time you looked at the company. This will save you lots of time, which can then be spent on uncovering new information that may be important.
So however you prefer to do it, we strongly suggest you use an investment journal to improve your investment decisions.