Register For Our Mailing List

Register to receive our free weekly newsletter including editorials.

Cuffelinks Special 250th Edition 2018

Special Edition 250 includes over 30 market experts sharing a mistake that made them better investors.

Since Edition 1 of Cuffelinks, we have focussed on independent expert insights from high-profile finance professionals to deliver useful ideas to our community, now over 35,000 strong.

It's an important time to learn these lessons, as the 88-year-old founder of Vanguard, Jack Bogle, recently said in a CNBC interview:

"I have never seen a market this volatile to this extent in my career. Now that's only 66 years, so I shouldn't make too much of it."

We had a fantastic response from people we approached, but something new happened this time. Disappointingly, some fund managers were prevented from offering a response by their legal and compliance team. It's a sad state of affairs when a fund manager is unable to admit a mistake, as we're all supposed to learn from them. The question we asked was:

"What is an enduring investment lesson you learned from making a mistake?"

We also had responses asking what a 'mistake' really is, such as:

"What is a mistake in investing? Too often managers admit to mistakes (that reveals their deep humility) that weren't mistakes; rather the market went against them. As in bridge, you can make excellent decisions with rotten outcomes and rotten decisions with excellent outcomes."

One famous local fund manager wrote that identifying a mistake can relieve stress:

"Insights from past failures can help boost performance on a new task – and this study is the first, as far as I know, to explain why. The researchers report that writing critically about past setbacks leads to lower levels of the 'stress' hormone, cortisol, and more careful choices when faced with a new stressful task, resulting in improved performance. The study, published in the journal Frontiers in Behavioral Neuroscience, is the first demonstration that writing and thinking deeply about a past failure improves the body's response to stress and enhances performance on a new task."

Another was more skeptical:

"The harsh truth is that I don’t believe any investor really learns from their mistakes in any meaningful way. By this I mean we can easily avoid investing in the same dud company, but that doesn’t stop us investing in other dud companies. We can then develop personal heuristics that steer us away from all companies that have similar traits to the dud one we lost money on, only to find out that some of them turn out to be great investments. The problem of course is that history never exactly repeats.

The reasons we make mistakes can usually find their roots in the human foibles we learn about in behavioural finance (anchoring, confirmation bias, recency bias, etc), and because we are human we keep making them. And the problem with the behavioural finance work is that it’s a very good descriptor of why we have stuffed up in the past, but offers little by way of prescription for future success. I reckon the biggest mistakes we are likely to make comes from over-confidence."

Investors learn from previous experiences, whether or not they are considered mistakes at the time, and sharing the lessons from market professionals may help our readers.

Graham Hand Managing Editor Cuffelinks

Download the eBook here

 

banner

Most viewed in recent weeks

How much super is enough?

We cannot see into the future, but here are some general guidelines on how much to save in super, and then how much you can spend to enjoy a good retirement. Start as soon as possible.

How to include homes in the age pension assets test

A reader speaks out about the inequity of ignoring own homes in the assets test for the age pension, plus a proposal on how it could work politically. Take our survey on the merit of the policy. 

OK Boomer: fessing up that we’ve had it good

The pre-Boomer generations faced global wars and depressions, but Australians born after 1946 have enjoyed prosperity. Superannuation, education, strong markets and surging property prices locked in gains.  

Four reasons to engage a financial adviser

The value of financial advice is increasingly questioned after the Royal Commission and changes to advice business models, but the case for financial advice for many people remains strong.

Should you buy CBA PERLS XII Capital Notes?

CBA's latest PERLS offer is directly offered to hundreds of thousands of investors who already hold CBA shares or other PERLS securities. How does it compare with the rest of the hybrid market? 

Latest Updates

Retirement

OK Boomer: fessing up that we’ve had it good

The pre-Boomer generations faced global wars and depressions, but Australians born after 1946 have enjoyed prosperity. Superannuation, education, strong markets and surging property prices locked in gains.  

Investment strategies

Young women are investing more in shares

Young woment are showing increasing confidence in the sharemarket, promising a better future than the Boomers and Gen X women who hold significantly less assets than males of their generation.  

Investment strategies

Shorting deserves more respect

A fund manager that can short sell stocks with weak investment characteristics while reinvesting the proceeds in long positions in preferred stocks has a high degree of flexibility.

Economy

Policymakers fear cutting stimulus can lead to recession

Prolonging a recovery with stimulus could lead to a worse slump later. Even today, policymakers are haunted by actions taken in 1937 which led to a loss of production and jobs and a falling GDP.

Shares

Bank reporting season scorecard for FY19

Our annual scorecard for Australian banks shows earnings were hit by remediation costs and slow credit growth, but they are in good health and look attractive versus other listed companies. 

Sponsors

Alliances

Special eBooks

Specially-selected collections of the best articles 

Read more

Earn CPD Hours

Accredited CPD hours reading Firstlinks

Read more

Pandora Archive

Firstlinks articles are collected in Pandora, Australia's national archive.

Read more