Investment Goals: The most important thing, to start with at least, is goals, clearly defined goals. It has helped me a lot to write this newsletter.

Investment Goals: The most important thing, to start with at least, is goals, clearly defined goals. It has helped me a lot to write this newsletter. The writing has helped me clarify my thoughts, plus taken me far beyond where they would have gone if I had just sat pondering things.  In trying to express my thoughts to others, I have clarified them for myself.

Goals are critical. Goals aim us, keep us focused and measure us. Without them, investing becomes chaotic and haphazard, at least for me. But if it applies to me, I can reasonably expect it applies to others too. And I can research the matter and see what others think, as well.

My goal is to make better investments and that is, not great investments or perfect investments, but simply better investments than I have made in the past. Warren Buffett said: “The first rule is not to lose [money]. The second rule is not to forget the first rule.” 

Making better investments sounds deceptively simple. And yet it is a little bit like dancing: experts make it look easy, and it’s not. Now I am thinking of how Peter Lynch expressed the idea (Peter Lynch, by the way, managed the Magellan Fund for Fidelity for 15 years. It was one of the largest and most successful mutual funds ever. He has since retired and written several books, one of which I read, Beating the Street, http://www.amazon.com/Beating-Street-Peter-Lynch/dp/0671891634.)

He said, “I just want to improve my chances.” I’m paraphrasing him because I can’t find the quote at the moment. But something happens to us when we contemplate our investment options: the mind mis-fires. Rational thought and rational action elude us. Habit, emotion, knee-jerk reactions, and shooting from the hip seem to take over. But my goal is to stick to my goal. And my goal is to improve my chances.

To that end, I will apply research and analysis, but never think I have found a sure thing. That is devastating. Overconfidence and under-confidence are both my enemies. I must find a balance in which my emotions do not control me or my decisions. They can come along for the ride, but that’s all I want to allow them.

I remember way back in management school, something I heard, “Management is the practice of trying to find order in confusion.” An application of that was another one I heard, “A manager’s job is to eliminate his job.” If he does his job well, he will straighten things up and move on.

Originally published in 1969, Dr. Laurence J. Peter’s “The Peter Principle” states: “In a hierarchy, every employee tends to rise to his own level of incompetence.” What he meant was that as long as we succeed at our jobs, we are given advancements. Then when we finally rise to a level where we can no longer perform, we are no longer rewarded with advancement and, ironically, become stuck where we perform the worst!

Do you remember when that one came out? It was a wower for a lot of people. But my goal is to remember that I am trying to find a little bit of order in the seeming chaos of the world of investing. I will never find perfect order, but I shouldn’t get confused about the nature of the task.