Friday, April 3, 2015

Improved decision-making, not financial knowledge the key



Better investment management is not always about knowing more finance. It is about making better decisions when there is limited information or a high degree of uncertainty. Good management is should be focused on taking the right action at the right time. Of course that seems obvious but it is done through understanding your biases and the process of how we think.

Knowing the research is helpful and a minimum threshold is required for success; nevertheless, research knowledge is necessary, but not sufficient for success in investment management. A good analyst may not be a good trader, but a good trader does not have to be a good analyst.

A focus on on the process of getting to a decision is critical. The process matters. The process  separates fast from slow thinking and understanding when thinking too fast is a hinderance as well as appreciating that slow thinking may impair your ability to take immediate action.

Sure we would all like to have more time to gain understanding of market dynamics, but if I had to pick one skill it would be the ability to make unbiased decisions using the right amount of information and the right amount of time for analysis.

No comments: