Investor Mastery

As featured in the Herald Sun – Friday 24th June 2016.
By David McCulloch – Market educator and consultant to Share Wealth Systems

In any worthwhile pursuit there will be challenges along the way. It has been said that what doesn’t destroy us makes us stronger and that can be quite true on the proviso that we learn from our experiences. Albert Einstein once quipped that doing the same thing over and over and expecting a different result each time is the definition of insanity. Certainly both sayings ring true in the financial markets where sooner or later some mistakes will be made. It’s important that we learn from them so that we reduce the chances of them occurring in the future, but even more important than that in my opinion is actually understanding that you did in fact make a mistake. Acknowledging a mistake is the first step to moving on, and shows a level of self- awareness pivotal to your own intellectual growth. Let me explain further.

There are four main stages that can be used to describe a persons level of understanding. Each level is characterised by certain traits and is generally described in terms of “competence”. The first level is referred to as “unconscious incompetence” and basically means that you are completely unaware of any wrong doing. Typically one might describe this as blissful ignorance which will continue to be blissful until a large enough stimulus comes along to remove all traces of bliss. A quick trip back to the GFC is enough to remind most of this level of competence or lack thereof with respect to the markets.

Now if that stimulus didn’t destroy you there’s a reasonable chance of progressing to the next stage, known as conscious incompetence. It’s here that progress can be made providing the individual accepts their mistakes and takes the necessary action to further develop. Repeating the same patterns of behaviour that allowed the stimulus to occur in the first place, and thinking that the same won’t happen again is according to Albert, “insanity”. Being consciously incompetent requires a level of ownership and a willingness to learn a better approach.

Focussing on learning and education helps to stimulate new cognitive patterns and at first this will feel uncomfortable and challenging. This is normal and over a period of time the processes that you are implementing will start to become more natural, although still requiring a concerted effort. This stage is called “conscious competence”. You are still quite aware of the need to concentrate, focus and use some “self- talk” to get things 100% right. Take heart, you’re now starting to mature in the understanding of your newly learned skills.

Finally, upon robotic like dedication the process seemingly appears to happen all by itself without any forced level of thought. Congratulations! You’ve made it to the highest level. “Unconscious competence” or mastery, is a level we all desire to achieve and as always requires a good deal of commitment. More so when it comes to your investing processes simply because most people don’t really have one or recognise the need for one. Blissful ignorance…? You be the judge.

David McCulloch is a market educator and consultant to Share Wealth Systems.