It is very interesting because we are more affected when we make a mistake in one of our investing decision or trade even though we have made a thousand right ones. That said, this comes at no surprise because any wrong is wrong in absolute terms whereas every right move is judged based on its significance in terms of profit. This is troubling because making bad moves or poor decision is after all unavoidable over time. These mistakes can come in the form of investing in an overvalued asset or perhaps being tricked into a pump and dump rally. In addition to the paper losses, bad decisions also locks up your assets which leads to a loss of opportunity cost. In today post, I intent to write a thought piece to share why bad decisions are actually essential and important for every investor’s journey.

Wrong moves are painful but also more educational

Lets face it, pain and punishment are part and parcel of life but few of us can truly appreciate its value. When investing, we are constantly tempted by the market to make a move. Whether it is to sell or buy, every move is potentially profitable or loss-making at some point in time. This is worsen when the market moves too much in a short period of time. That is when our minds are tugged away from our logical brain by fear or greed. After the “event” ends, we will usually feel silly making a move or staying inactive but what’s more important is that we have already made a loss or have missed a chance to sell at a higher price. These lessons are usually way more painful than others because they basically reflect our folly in monetary terms. Hence I feel that these mistakes teaches us more valuable lessons than making right moves in the market.

Mistakes are not “wrong moves” if they follow a logical strategy

As investors, we might sometimes mistake legitimate moves with mistakes. To explain this rather confusing statement further, allow me to use an analogy. When we were young, we might have brought a cup of water for our family member but ended up spilling the water on the ground and getting reprimanded for it. Although the outcome is that we got scolded, it does not mean that our intent and methodology was flawed. From the third person’s perspective, we might have noticed that the intent of the child was actually good and hence, he or she should have been praised instead. What I am trying to drive at is that we should always reflect on our actions and evaluate them objectively. If the move you made had gone through sufficient consideration and planning, then the result should not determine the entire value of that move. This is because there is no way that we can predict the future but we can always do our best to anticipate scenarios that might occur in the near to mid terms.

Making poor decisions tells us a lot about our personality

Some lessons are best learnt alone. Few people in the world are actually courageous enough to admit their mistakes and shortfalls even to themselves. When investors make obvious errors in their judgement, it does not only equate to monetary losses because some of them are just too egotistical that they refuse to accept their mistakes. Such denial results in boastful attitudes on social media channels and the obvious absence of honesty from the community. Therefore, instead of hiding our shameful mistakes we should be open to sharing those valuable lessons to others and make the best of it. True enough that it does not necessary make you more influential or famous but at least it will benefit someone who is able to learn from your mistakes and perhaps avoid it in down the road.

Closing Thought

We should always avoid making mistakes and wrong moves but when they happen, we should also know how those mistakes affect the way we think. To ensure growth and progress in investing, all investors should take every outcome as bravely as possible so that they can avoid such mistakes in the future and share those experience with others as well. My belief is if more people are willing to share and face their mistakes, then the whole investing community will be more humble and less obnoxious. At that time, perhaps the market will be more logical and investing might become easier.