The Art of Execution: How the world’s best investors get it wrong and still make millions by Lee Freeman-Shor

The Art of Execution looks at the decisions investors make after taking a position in a stock. Whether you are up or down on your original investment, it’s easy for different behavioural biases to affect your judgement.

Book notes

Don’t get into a position that is too illiquid to sell on public markets

Ensure your views reflect reality

Don’t be slow to change your mind

Get comfortable with crystallising losses

Big positions can make you indecisive

Have a plan before making an investment about what you will do if it doesn’t work out

Ask yourself: “would I buy into that stock [today] given what I now know?”

Speak to people with opposing views

“A loss of 33% requires a 50% subsequent return to break even.”

Don’t let the original rationale for investing cloud your later judgement

Beware of the “break-even effect” – risk-seeking behaviour after suffering a loss

And beware of the opposite effect – risk aversion when you are ahead

Peter Lynch: “I’m accustomed to hanging around with a stock when the price is going nowhere. Most of the money I make is in the third or fourth year that I’ve owned something.”

Target long holding periods of ten years or more

Buy The Art of Execution on Amazon (affiliate link)