Broker Check

The Benefits of Keeping an Investment Journal

January 02, 2015

In creative work, a written record can be a great tool. Writers, composers, painters and dancers are known to take a great deal of inspiration from written records of their own ideas. Even ideas that seem unremarkable at first, when written down, can draw the mind to thinking in new ways. If you are a serious investor, a meticulously kept personal investment journal is no less relevant. It can help boost your ability to see investment connections, possibilities and trends that might never otherwise occur to you.

Proof is in the numbers for investment journal-keeping 

In November 2012, a story in Forbes titled Why Investors Need a Diary to Track Stupid Mistakes and Brilliant Movesfollowed Mitch Rubin, manager of RiverPark Long/Short Opportunities Fund, and an investment journal enthusiast. The report details how Mr. Rubin tracks his investments in any market condition and the level of returns in his investment journal. 

With thousands of investment decisions recorded in his investment diary, Rubin mentions that he has an easy time identifying trends in his successes and losses. He uses his knowledge of his mistakes to learn about his strengths and his weaknesses. He calls his journal his most important investment tool.

Mr. Rubin’s fund launched in 2010, during a tumultuous time in the market and has consistently outgained his peers.  He owes much of his success to the investment diary that he keeps in the form of an Excel spreadsheet.

A journal can contribute to the way you invest in other powerful ways as well.

The benefits of recording every idea you have 

If you're serious about investing, you probably spend time thinking about understanding the markets. Brainstorming can lead to all kinds of new ideas, questions and thoughts about angles to explore each day. A diary can help you make sure that you never lose an important thought.

When you need to think back about how exactly you came by an idea, a diary can be a much more honest record than your memory. It can tell you if your successes and losses are your own doing, for instance, or flukes.

A diary doesn't need to be private 

Millions of serious amateur investors are fanatical about understanding how the markets work. If you choose to put your investment diary online in the form of a blog or website, you will gain a following, and find all kinds of good, constructive criticism that can lead to new angles on the choices you make. Publishing your investment journal can be an excellent learning tool.

Record everything and anything

Every investment decision you make, as you make them, should go into your journal. Your notes should be detailed enough to help you recall the exact reasons for every move. Here's a hypothetical example of how you would go about making your notes.

·      Buying Tekmira Pharma at 15 in July. The hope to see it rise to 20 by the end of the year on the back of their new Ebola drug. Note in November: While it's fallen to 13 now, the dividends more than make up for it. Note in December: Buying it was a mistake -- the company's Ebola drug hasn't taken off as expected. If it weren't for the dividends, this would be a loss.

·      Making a risky move buying agricultural chemicals company American Vanguard at 11. While the company has seen earnings drop 33%, and its stocks that have taken a 10% hit, it looks like it could gain once they get rid of excess inventory. This stock should be a long-term winner.

Putting down thoughts of this kind to explain every investment decision can keep any investor more honest, more focused and more in touch. Keeping an investment diary over the long-term can show you patterns in your thinking and uncover new ideas and strategies for future investing. You may find that a daily journal will become a very important investment tool.