It is my belief direct and sometimes controversial belief that if you are not investing with some kind of checklist then you are really speculating and your results over time will be mediocre or poor. Having poor results with investing means losing money, and sometimes lots of it. Having checklists though puts all of your thinking on paper in advance using a systematic approach, makes you laser-focused on making intelligent decisions without emotion, and keeps you disciplined thereby reducing or eliminating errors that can be very costly. As is detailed in the book, The Checklist Manifesto, many industries have been completely revolutionized by the incorporation and daily use of checklists. In the air transportation industry, checklists have helped reduce airplane accidents and casualties. In the healthcare industry, checklists have helped reduce hospital stays and medical mistakes like operating on the wrong body part or leaving the gauze used in an operation in a patient.
You can be a one-hit-wonder investing without a checklist, but to deliver results consistently in investing over time you are using a checklist of some sort.
Every investment strategy that I use personally and in all of my businesses has a checklist. In my Real Estate Investing Business, we use lots of checklists. I have checklists for each type of property I take on as a fix and flip, wholesale, or buy as a medium or long-term holds. I even keep a checklist on properties I want to pass on or want to avoid. For properties that we are remodeling, I have checklists for repairs, color schemes, etc. I also keep checklists for the financing that we are willing to take on or that we avoid. I detail all of these checklists in the Real Estate Buying Machine program.
In my Buffett Income and Profits Investment Strategy Program, I have technical and fundamental checklists as to when to buy, sell, and hold Berkshire Hathaway. I even have checklists within these checklists to show when to sell some, most or all of Berkshire Hathaway. I have checklists on when it is a good time to sell calls or puts for income as well.
In my Main Fund Investment Strategy Program, I have an entire criteria checklist and then checklists for scanning for the stocks that meet the criteria, false positives that show up on stocks the meet the initial criteria,
questions to ask and what to avoid. All of these questions, help to narrow in what precisely we are looking for, and screens out what we don’t. When you have a checklist or use someone else’s backtested checklist, your thinking becomes a lot more clear.
Even my missteps over time are incorporated into checklists. Every new mistake or lesson gets backtested and put into the checklist. This way learning is cumulative and builds on itself and mistakes are not repeated. Warren Buffett’s has a famous quote about his rule of investing “Rule number 1 is to not lose money and goal number two is to not forget goal number one.” Investing with a checklist, helps you to not lose money. When you don’t lose money, compound interest can then powerfully take place from all of that investing error reduction.
If you are not using some kind of checklist when investing, then I highly recommend that you stop. Get a checklist. Commit to being an investor, and not a speculator. Use checklists.