Portfolio Update – April 2021 – What a Game of Chess Can Teach You About Your Instincts as an Investor
- How can you become a better investor from understanding how you play chess
- Monthly Update for April 2021 with a fresh set of charts
- Book tip: Adaptive Asset Allocation by Adam Butler, Michael Philbrick and Rodrigo Gordillo (link at the bottom of the post)
- In case you missed it: I've launched a shop for tools and resources (both paid and free) for easy portfolio management, all within the Google Spreadsheets framework
Are you sure if your instincts align with your intended way of investing?
I am asking this because if there is a mismatch between what kind of person you are when it comes to your decision making and acting on new information on the one hand and your investment goals on the other hand, you will not reach your financial goals if you do not know yourself.
How your mind works and how you behave matters more than you think when it comes to investing, as it will impact firstly the investment strategy you chose, and secondly, how you implement and deviate from the strategy in new situations and changed market conditions.
But regardless how good an investor you are or what instincts come naturally to you, if you know who you are as a person and how your mind works, you could prepare your strategy already in advance to be better equipped to face the challenges that financial markets can throw at you. Even an investor with less experience and bad instincts can succeed in tough times by setting up clear and good rules for how to behave and then rigorously stick to those rules, cutting out all emotion.
Rule-based investing with a well-diversified portfolio is an extremely easy way to continuously hit good results without great losses. And if you diversify also between asset classes, choppy markets can even be your friend when you rebalance the portfolio from well-performing assets to assets that are at their relative lows.
But how do you know what mind you posses and what instincts you have?