Few people know better than Viswanathan Anand how to think strategically at lightning speed and work under immense pressure and overcome the toughest odds. Even Though chess and investments are different, there are quite a few lessons that investors can learn from the sport. I found dimensions where the chess champion’s thought process had components that investors can use to build a good investment system.
- Before making your move
In his book, “Mind Master” Anand has described in a lot of depth, the level of preparation required before the match. One of the major points he mentioned was going through experiences of former legends in chess. This can work for the investors too. It is essential to study the history of strategies that worked in the markets in the past. investors can learn the investment philosophies of successful investors and what style of investment gave good results.
- Error checking
Error checking is important in both chess and investments. Among all biases in investments, the most vicious bias is confirmation bias. Once the investors are gripped by the content of the stock, they strongly engage in confirming opinions. Before making any investment one must look for faults in the concept, be critical and try to be the devil’s advocate. At times missing out or misjudging a minute detail can be a defining factor for long-term returns from a particular investment.
- Recording of decisions and review
Anand states in his book that he made it a habit of writing down his impressions immediately after every game. This helped him understand his mistakes and what he could have done differently during the game. In the same way, maintaining an investment journal works the same for investment decision-making. As the investment is made, the investor must pen down the reasons behind the investment decision. While reviewing, reflecting on the result and the initial hypothesis will underline if there were any mistakes in predictions or any new concept that can be carried for future investment decisions.
- A Grandmaster of Investments
Sports like chess include strategies, planning, tactics, etc, point out the significance of process and discipline. The ideas, processes, and techniques used by players over the years can be studied and used to improve investment decision-making. The points discussed above can help plot a functional investment process or strengthen it.