Having a personal investing journal is a simple and effective way for an investor can keep track of his investments. An investment journal should not be used solely to keep track of every investment or trade you do. It should also outline the reasons and the psychological framework for each of your trading or investment decisions.
What is an investing journal?
An investing journal is either a notebook or a word file where you keep all of the information behind your investment decisions. If you buy or sell a stock, it is important to put that information in your investing journal. Make sure you add the dates and the exact trades you made.
Additionally, an investing journal can be a fundamental part of your investment process. As it allows you to easily record your thesis behind every trade or investment you make. This becomes extremely useful to compare it in the future.
For example, one of your stocks has not been performing the way you expected. You can go back, and check exactly what were the reasons behind your investment decisions. Ask yourself if anything has changed since then.
What should you keep in your investing journal?
Keep all the dates, and transactions you have made. Write down the reasons behind each of these trades. What your analysis of the stock is, and what is the bullish case.
The 4 main things you should keep in your investing journal are:
- Investment Thesis
By initially outlining all of these aspects you can then go back and compare it with how your investment is currently doing. Perhaps your investment thesis was flawed, or you did not properly assess the risks. These are common investing mistakes that you can avoid.
An investing journal helps you to remember, and organize everything that goes into your investment decision.
Having an investment journal allows you to:
- Understand your investment decisions better
- Improve your investment process, and investment analysis
- Compare past investment thesis with current conditions
- Become a better investor
How do I make an investing journal?
Investors can either have a physical investing journal like a notepad or have a word document for that purpose. In both cases, you should be wary of who might get access to your investment journal, if you are sharing important information that you would not like to disclose with anybody else.
Why should investors have an investment journal?
The main goal of having an investing journal is to keep track of all your investments in one single place. However, there are more nuances to it. By having an investment journal you are able to also keep track of your investment decision process.
Instead of simply writing down all of the transactions make sure you explain in detail what led you to buy or sell a specific stock. This is extremely useful, not only for future decisions but to also keep track of your investing journey.
As it allows you to better understand why you made a certain investment decision in a given period of time. You can also compare your investments based on the reasons behind every decision.
For example, if the outlook for a specific stock has changed, you might want to go back to your investing journal and understand whether or not that was contemplated in your initial analysis. It might also be important to see if something happened since the initial investment that you did not include in the risks.