James Kirby: ‘It’s time to revisit my six worst investing mistakes’

Some years ago I was involved in an investment conference that ran over two sessions – one in Sydney and one in Melbourne.

The star of the show was Kerr Neilson, the billionaire investor who had created the Platinum Asset Management and was widely seen as one of the best investment minds in Australia.

I was keenly anticipating the Neilson session, but at that first event in Sydney I was terribly disappointed. The entire theme of ­Nielsen’s presentation was around investment bias – how your innate characteristics can define your ­investment performance unless you first understand them and then get on top of them to become the best investor you can be.

In common with many others in the audience, I wanted Neilson to tell me what was really going on inside investment markets at that particular time. Instead, the scholarly Nielsen ignored the issues of the day and delivered his message in a controlled – almost deadpan – manner that left me frustrated. In fact, I hardly listened to the presentation the first time around.

I have two stocks in my relatively small share portfolio of a dozen companies that share this distinction. Hansen Technologies was the stock that got me started in small caps and it went from $1 to $5 – but it’s been about the same price for the last four years. Similarly CSL doubled since I bought it first – again, its price is virtually unchanged for years now.

I bought these two companies as growth stocks – only they are not growing. I like them too much though – I should sell them, but I don’t. Will I ever? Good question.

You’re on your own, kid

Exactly 20 years ago, I started my own self-managed super fund. It was a major decision and I made it an even bigger decision by going full throttle and putting every penny I had into the fund.

But I made one mistake: in moving all my money into a SMSF, I did not think through the reality of being absolutely on my own – I had to pay for life insurance every year from the SMSF and it was extremely expensive.

Eventually, I thought it through and I dropped paying for life insurance entirely – I have been self-insured for five years.

However, if I had even left just a tiny amount of money with my former big super fund, I could have continued to pay life insurance each year through the fund, enjoying its tremendously discounted group rate.

In making big investment ­decisions, you need to take into consideration every single aspect of it. Something I failed to do with the SMSF.

The best mistake ever

This mistake was plain stupid, but I did learn to be flexible and that is always useful.

One day about a decade ago, I had many things to get done one morning – among them a decision to buy from my broker a small cap ETF on the ASX. I put through the order and noticed the next day that I had bought the wrong ­product.

In a fat-finger moment I had accidentally ordered a US market small cap ETF. Duh?

I was so busy that week I did not get a chance to rectify the situation that day and when I went back to sort it out weeks later, the ETF had done well – considerably better than an ASX version of the same thing. It was my first venture into US shares, and there have been many since. I still hold the US small caps ETF a decade later – it’s been a beauty … the best mistake.

You never quite conquer bias as an investor, but the more you understand it and work to eliminate it, the better you become.

James Kirby hosts the twice-weekly Money Puzzle podcast.

This article first appeared in The Weekend Australian.