“The only way to avoid mistakes is not to invest–which is the biggest mistake of all. . . . The big difference between those who are successful and those who are not is that successful people learn from their mistakes and the mistakes of others.”  Sir John Templeton

Hey, let’s be honest, we all mess up. Then, we look at others who are successful and think, “I’ll never be as successful as they are.  They’re smarter, luckier, better educated (you name it).  They haven’t made the mistakes I’ve made.  I’ll never get ahead.”

And when we screw up investing we can think, “Boy, I’m not going to do that again.  I’m not taking any more chances.  From now on I’m putting my money in safe investments.  Think of what I’d still have if I’d done that this time.”  And we grow so conservative we won’t take any risk so we give ourselves no hope for gain.

Or the opposite, we blunder on ahead making the same mistakes over and over.  And then we can’t figure out why we don’t get ahead financially.  Hello?

I’ve made a lot of mistakes in investing. Years ago I had money in several stocks when the market took one of its dips.  I was inexperienced and panicked.  My father, who lived through the Depression, talked often about people losing all their money in stocks.  I thought, “What happens if I lose it all?  What if it keeps going down?”  So I sold everything losing several thousand dollars only to watch the market recover a few weeks later and go on to new highs.  I eventually got back in and diversified into real estate as well.   I analyzed what I did wrong and learned to ride out the difficult times to take advantage of the good ones.

One of my favorite money managers has a “mistake wall” just outside his personal office.  On it he posts the name of every company stock he has bought that was a mistake.  The wall is full.  In addition in his quarterly shareholder reports he gives a section describing the mistakes.  He has said, “It helps me remember and learn.”  Has a constant reminder of his failures caused him to give up?  No, exactly the opposite.  He has continued a legacy of successfully investing for others and his family that stretches back several generations.

Warren Buffett, perhaps the most successful investor of all time, in his biography tells of the blunder he made buying Bershire Hathaway, a dying textile company.  He goes on and relates stories of investing with people who turned out to be unethical or incompetent.  His mistakes cost him millions but he continued to work through the issues never quitting.  He always faced his mistakes head on so he could learn from them.  Then he developed new strategies so he didn’t repeat them.  Along the way he became hugely successful.

So if we’re going to make mistakes in investing what do we do?

The bible says, “He who ignores discipline despises himself, but whoever heeds correction gains understanding.” (Proverbs 15:32, NIV)

Our choice isn’t whether we’ll make mistakes but what we do with them.  Do we learn from them and grow more successful or not?

How do we do this?

First, expect mistakes. No matter how careful or conservative we are sometimes we’ll get caught by surprise.  Don’t berate yourself or be depressed.  Mistakes are part of life and investing.  Don’t get derailed by them.

Second, if you make a mistake ask questions. “What did I do wrong?  What should I have done?  What should I do differently in the future?  What did I do right?”  When we take the time to analyze our mistakes we turn them into learning experiences so they’re not wasted.  It’s hard work but success always is.

Third, formulate a new strategy. Take time to write out what you’ll do differently.  To blunder on doing the same things but expecting a different outcome is one definition of insanity.  If we’ll take what we learn and apply it we’ll grow more competent and successful.

Fourth, pick yourself up and get in the game again. To give up is the biggest mistake of all.  When we do we’ve let a mistake turn into failure.  Successful people just never quit.  They get up time after time and just keep going.  And eventually they accomplish their goals.

Fifth, I like what John Templeton says, “Learn from the mistakes of others.” I’ve heard it said, “No one has enough time in life to make all the mistakes himself.”  Read the books and biographies of successful people.  Listen to CDs.  Consult those with more experience that you.  If we learn from their mistakes we don’t need to repeat them.

Sixth, and most important, ask for God’s insight. Ask him to guide you.  Ask him to show you where you messed up and what to do differently.  Find a quiet place where you can meditate and listen to God’s answers.  He wants us to be successful.  He will lead us into it if we’ll just ask and listen.

What can we expect?

• No more mistakes?  Sorry.
• Less severe ones?  Hopefully.
• Not the same ones?  Definitely.
• Financial success?  Much more than we would have otherwise.

Let me know what you find.  And if this post has been helpful let me know that too.  Also please share it with someone else.  And if you would like automatic updates please subscribe.  I appreciate it.

Important Disclosures:

Douglas Armey, the LPL Financial adviser associated with this website, practices in Fresno, California and may discuss and/or transact business only with residents of the following states:  California, Idaho and Oregon.

The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. To determine which investment(s) may be appropriate for you, consult your financial advisor prior to investing. All performance reference is historical and is no guarantee of future results.

Securities offered through LPL Financial, Member FINRA/SIPC.  Member of Securities Investor Protection Corporation (SIPC).  For an explanatory brochure please visit www.sipc.org.          www.finra.org