The end of year signals a time of reflection, accompanied by renewed optimism for the year to come. For many of us, our reflection and contemplation results in the formation of New Year’s resolutions. While some investor’s resolutions will demand increased discipline and dedication, there is a more powerful action you can take to help ensure your success in 2011; it involves looking back.


Conducting a thorough post-analysis on your 2010 portfolio performance is immensely beneficial. A complete examination of both successes and failures will teach you a lot about your trading style and strategy. When conducting post-analysis, it is important that you review your notes from your past positions and consider the following for each. (If your notes don’t contain sufficient information to answer these questions, consider capturing this information on your buy and sell decisions going forward.)


1.) The date, number of shares, and cost of each purchase and sale.

2.) Reasons for buying and selling. Did you identify and react to buy and sell signals correctly?

3.) Fundamental Strength. Do you need to modify your selection criteria?

4.) Industry Group Strength. Did you buy a leading stock in a leading group?

5.) Market Confirmation. Did you invest in line with the market trend?


You’ll find your biggest gains will be the most enjoyable to review. They will show you the strengths you possess as an investor and subsequently the type of investments you should pursue more actively. However, it will be your biggest losses that will be the most valuable to study. Take particular note of what combination of factors, characteristics and decisions led to the loss. You may find that there is a multitude of weaknesses you commonly overlook while trading, or maybe it's one particular element or factor that seems to give you trouble. Moving forward, you can modify or add rules to your strategy to prevent future mistakes.


One of the reasons we advocate for a rules-based system of investing is that when decisions are based on a strict set of rules, each rule can be thoroughly back-tested. If a rule or decision isn’t making you money, you can identify it and modify it. It is from this process of post-analysis, constant reflection and ongoing improvement that successful investors emerge.