You could back-test your strategy: That is, you could go back in time and check how your investment strategy would have fared.Reduction or elimination of biases it the biggest trick that can help reap outsized returns. You could completely eliminate behavioural biases: I have come to believe that the biggest determinant of investment success is NOT stock selection, which unfortunately 99 per cent of investors only focus on, but behavioural psychology.It was rule-based which meant the process was most important: You had rules for the three main components of investing namely i) stock selection, ii) allocation and iii) selling.My endeavour is to synthesize what practical lessons I have learnt in over two decades of value investing. Since I had a computer programming background and love programming to this day, this whole approach appealed to me. I came across some fantastic books, people and resources. Then I started reading up on quantitative investing. What astounded me was that a person with no intrinsic knowledge of markets has been able to compound money at a rate nearly three times that of Buffett, and that too sustainably over decades. Man Who Solved the Market (bestselling book by Gregory Zuckerman). About three years back, I chanced upon Renaissance Technologies, now famous for Jim Simons, the I have always approached the market as a student. I discovered Buffett, Munger, Lynch early into my investing life and that has shaped my thought process to a great extent. This has led me to search and read biographies of a very large number of investors and traders. I have always been curious to learn more about the art and skill of investing and what has made people successful.
Yet, I could get all the lessons without much of the scars. Having started in 2000 and immediately seen the dotcom crash, followed closely by the 9/11 the following year, which sent the markets reeling, I was lucky because I did not have much money in the market at the time. This year marks the 20th year of my investing career.
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