Register For Our Mailing List

Register to receive our free weekly newsletter including editorials.

Home / 143

Learning from my investment mistake

I recently made what I consider to be an investment mistake in my personal portfolio. Strangely, it doesn't look like a mistake on paper, but you only become a better investor by admitting and learning from your errors. Whether a work or a personal investment, a post-mortem is an important process to go through whether the investment was successful or not.

I will share my broad reflections of this experience with you. For confidentiality reasons, I cannot provide all of the details but I don’t think that stops me giving some useful insights.

For personal background context, you should know that I work in wealth management, study and have a young family. I love my work and have had a history of prioritising my work and my study above my personal finances. I have a lifelong trail of personal operational slippages which have cost me through the years, for example, not claiming refunds on expenses and not completing paperwork to accept free staff share offers at previous companies. At least things now align better as my super is invested in the fund that I manage at Mine Wealth + Wellbeing.

A little while ago, I made a private equity-style investment. For much of the time I was invested, I felt uncomfortable with the exposure. Recently it was restructured and I was fully paid out, both principal and interest. Overall, if you just looked at my outcome (low double digit annualised returns) you would say that it was a good investment. But deep down I know I made some fundamental mistakes.

What were my mistakes?

The first, and largest, mistake was the time I spent undertaking due diligence. Due to time constraints, I put in what I thought was a sufficient amount of time, but on reflection I should have put in a lot more. How much time is the right amount? The answer to this question is not known at the start of the due diligence process; rather a point is reached where you feel confident you have an appropriate amount of insight. Allocating time for due diligence is especially important in the case of illiquid investments where there is no opportunity to capitalise on subsequent learnings (unlike listed stocks for example when you can change your mind and exit the position with little cost). Different types of investments require different levels of due diligence. In the case of a private investment a large amount of time should be dedicated to the business model, competition, financial analysis and the structure of the transaction.

The related mistakes were broadly flow-on effects from the first mistake. When you are time poor you do less primary research (your own independent research) and take shortcuts such as relying on the information presented to you and taking confidence from the quality of the co-investors. These are examples of shortcuts that work well often but not always.

It’s also important to reflect on what went well. I was involved in the structuring of the original investment and overall this was well-designed in the sense that it provided lots of protection for investors. Also by investing alongside some high quality investors it did prove that they were able to have some positive influence on the final outcome as the investment wavered (and it did get hairy: at one point, interest payments were missed).

Lessons for other investors

A post-mortem is a valuable process for all investors. It allows you to reflect on what went right and wrong and to consider improvements to your investment process. If you are reflecting as a group (for instance, we do this at Mine Wealth + Wellbeing) there can be moments where people may feel defensive but if the session is run positively then a lot of good can come from it.

The reflections I make are largely for personal investors, and particularly those who have an SMSF:

  • As much as investing is interesting, do you have the skill to select your own investments? What is your personal investment edge that justifies selecting your own investments rather than relying on professional fund managers or using passive investments?
  • If you believe you have the skill, do you have the time to appropriately assess investment opportunities and conduct ongoing monitoring on each of your investments? In my case I believe I have the skill but time was the issue.
  • Are there investments that you are considering because they sound interesting and would be a great conversation starter? If yes, do you have the skill and time to appropriately assess and monitor these opportunities? Sometimes these skills need to be even more specialised. Strategies like hedge funds and private equity sound exciting but they can be much more complex to assess.
  • If you are considering private (illiquid) investments, then the issues raised about skill and time are even more important: you cannot easily reverse your decision once it is made.

Following on from my self-reflection I changed the way I invest my personal portfolio. I acknowledge that I don’t have enough time to undertake due diligence and conduct ongoing monitoring on a range of investments. Indeed, my personal investment process is well below the investment process I apply at work. I came to the view that this makes investing in private, illiquid investments a bad match for me at this stage of my life. So now I invest in liquid assets through managers that I know very well and trust. As my personal situation changes then the scope of my personal portfolio management activities may also change.

Being honest with yourself is an important starting point when designing and evolving your personal investing strategy. How well does your current strategy line up against your skills and time availability?


David Bell is Chief Investment Officer at Mine Wealth + Wellbeing. He is working towards a PhD at University of New South Wales.


Warren Bird
February 21, 2016

Here's a question for you - David and anyone else who'd care to answer. (Graham, maybe this could become a separate topic.)

Do you think the guys in The Big Short made an investment mistake? As I was watching the film last week I couldn't help but thinking that, especially those that were managing other people's money not just their own start-up seed funding, that they took one heck of a risk putting the whole value of their capital at risk on this one position.

Is that investing or is it gambling? To me it's the latter, but then again it might just be a style of investing that, as long as you know you're taking such a binary risk (make a motza or lose the lot), is OK. What do people think?

Been there B4
February 20, 2016

Some years ago I invested in an unlisted company that was to provide "smart" services to the energy sector. The services were quite complex and would have been difficult to describe to the guy in the street. After a couple of further capital-raisings ( read put hand into my pocket) the company was purchased by a "trade-buyer" with genuine knowledge of its potential.

I got out of the position with a modest profit. More luck than analysis

Now I get concerned with the IPOs of outfits offering Apps with Software as a Service in the Cloud ... but what do they really do and who are the paying customers?

Vishal Teckchandani
February 19, 2016

This is great reading that shows no matter how far we are in the investment knowledge curve, there will always be mistakes to make and lessons to learn.

David Bell
February 19, 2016

It really is a factor of time isn't it!? The process we undertake at work is very tight... yet that leaves me with little time to apply the same standards to my personal investments. It is so important to be realistic about how ambitious you can be with your personal investment strategy.

Cheers, David

February 19, 2016

Here are some things I've missed in similar circumstances: fine print in CEO contract, fine print in loan agreement with bank, or in share-holder agreement, or missed a higher ranking security over premises, or non-disclosure of some contingent liabilities in balance sheet, misunderstanding option exercise terms, etc (these are lessons I have learned over the years)


Leave a Comment:



At 98-years-old, Charlie Munger still delivers the one-liners

Investment 101 and the greatest risk in investing

Wealth doesn’t equal wisdom for 'sophisticated' investors


Most viewed in recent weeks

Is it better to rent or own a home under the age pension?

With 62% of Australians aged 65 and over relying at least partially on the age pension, are they better off owning their home or renting? There is an extra pension asset allowance for those not owning a home.

Too many retirees miss out on this valuable super fund benefit

With 700 Australians retiring every day, retirement income solutions are more important than ever. Why do millions of retirees eligible for a more tax-efficient pension account hold money in accumulation?

Reece Birtles on selecting stocks for income in retirement

Equity investing comes with volatility that makes many retirees uncomfortable. A focus on income which is less volatile than share prices, and quality companies delivering robust earnings, offers more reassurance.

Is the fossil fuel narrative simply too convenient?

A fund manager argues it is immoral to deny poor countries access to relatively cheap energy from fossil fuels. Wealthy countries must recognise the transition is a multi-decade challenge and continue to invest.

Superannuation: a 30+ year journey but now stop fiddling

Few people have been closer to superannuation policy over the years than Noel Whittaker, especially when he established his eponymous financial planning business. He takes us on a quick guided tour.

Anton in 2006 v 2022, it's deja vu (all over again)

What was bothering markets in 2006? Try the end of cheap money, bond yields rising, high energy prices and record high commodity prices feeding inflation. Who says these are 'unprecedented' times? It's 2006 v 2022.

Latest Updates


How to enjoy your retirement

Amid thousands of comments, tips include developing interests to keep occupied, planning in advance to have enough money, stay connected with friends and the community ... should you defer retirement or just do it?


Results from our retirement experiences survey

Retirement is a good experience if you plan for it and manage your time, but freedom from money worries is key. Many retirees enjoy managing their money but SMSFs are not for everyone. Each retirement is different.


Why short-termism is both a travesty and an opportunity

On any given day, whether the stockmarket rises or falls is a coin toss, but stay invested for 10 years and the odds are excellent. It's at times of market selloffs that opportunities present for long-term investors.

Investment strategies

Fear is good if you are not part of the herd

If you feel fear when the market loses its head, you become part of the herd. Develop habits to embrace the fear. Identify the cause, decide if you need to take action and own the result without looking back. 

No excuses: Plan now for recession

The signs of a coming recession are building, especially in the US. In personal and business decisions, it's time to be more conservative and engage in risk management until some of the uncertainty is resolved. 


The fall of Volt Bank removes another bank competitor

The startup banks were supposed to challenge the lazy, oligopolistic major banks, but 86 400, Xinja and now Volt have gone. Why did Volt disappear so quickly when it had gained deposit support and name recognition?


Three main challenges to online ads and ‘surveillance capitalism’

Surveillance capitalism refers to the collection and use of consumer data to further profits. Will a renewed focus on privacy change the online-ad business model, or is it too entrenched?



© 2022 Morningstar, Inc. All rights reserved.

The data, research and opinions provided here are for information purposes; are not an offer to buy or sell a security; and are not warranted to be correct, complete or accurate. Morningstar, its affiliates, and third-party content providers are not responsible for any investment decisions, damages or losses resulting from, or related to, the data and analyses or their use. Any general advice or ‘regulated financial advice’ under New Zealand law has been prepared by Morningstar Australasia Pty Ltd (ABN: 95 090 665 544, AFSL: 240892) and/or Morningstar Research Ltd, subsidiaries of Morningstar, Inc, without reference to your objectives, financial situation or needs. For more information refer to our Financial Services Guide (AU) and Financial Advice Provider Disclosure Statement (NZ). You should consider the advice in light of these matters and if applicable, the relevant Product Disclosure Statement before making any decision to invest. Past performance does not necessarily indicate a financial product’s future performance. To obtain advice tailored to your situation, contact a professional financial adviser. Articles are current as at date of publication.
This website contains information and opinions provided by third parties. Inclusion of this information does not necessarily represent Morningstar’s positions, strategies or opinions and should not be considered an endorsement by Morningstar.

Website Development by Master Publisher.