I recently invested in a stock (First Sensor, a European sensor producer) that went up a lot after I purchased it. At the same time, I invested in a stock (ALJ Holdings, a conglomerate of various U.S. service businesses) that went down a lot after I purchased it.
The other day, I thought to myself, "If only I had put all my money into First Sensor and not bought ALJ, that would have been way smarter!" Then I shook my head. Hindsight is always 20/20. Sometimes you make good decisions and get unlucky, and sometimes you make bad decisions and get lucky. A lot of times you make average decisions and get lucky and think you're better than you actually are.
Several years ago I wrote a blog post on this blog declaring that I had purchased Netflix at $76 and sold it at $91, and that I thought the stock was slightly undervalued, but it would have low long-term profit margins. In fact, I was right. Netflix has consistently returned low profit margins. Yet selling Netflix was one of the worst investment decisions I have ever made. Its competitive advantage and stock price is stronger than ever. If I had just held onto my shares, I would have multiplied my investment by 20 or 30 or some embarrassing number like that.
The point of this post is, don't only judge yourself on outcomes. Judge yourself on the process, the intentions, the methodology, and the outcomes. Your null hypothesis should be that you are average; you are not smarter than the market. Assume that is the case until you do enough due diligence and find a process that proves otherwise. And recognize that many of your successes and failures are coincidence.
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