Short written checklist:
- Is this within my circle of competence?
- Is it a good business?
- Do I like management? (Operators, capital allocators, integrity)
- Is the stock incredibly cheap? Am I trembling with greed?
Actively seek out contrary opinions
- Ask "What would cause me to change my mind?"
Don't anchor on historical information/perceptions/stock prices
- Keep an open mind
- Update your initial estimate of intrinsic value
- Erase historical prices from your mind; don't fall into the "I missed it" trap
- Think in terms of enterprise value not stock price
- Set buy and sell targets
• Admit and learn from mistakes
- Learn the right lessons and don't obsess
- Put the initial investment thesis in writing so you can refer back to it
- Sell your mistakes and move on; you don't have to make it back the same way you lost it
- But be careful of panicking and selling at the bottom
• Don't get fooled by randomness
• Understand and profit from regression to the mean