A template short enough that you will actually use it, and specific enough to be worth reading in three years. Write one by the end of this lesson.
8 min read · Level 4
The temptation with a template like this is to treat completeness as the goal, and the better goal is friction low enough that the eleventh entry gets written as readily as the first. That is a real trade - eight lines genuinely capture less than fifteen - and it is worth making because the value of a journal is superlinear in the number of entries and roughly flat in the depth of each one. One magnificent entry teaches nothing; twelve adequate ones show you that you consistently skip the price paid. There is a second-order effect that is easy to miss and possibly matters more than the record. A template with a pre-mortem in it and a line for what you did not examine does not merely document a decision, it interrogates one - and an investor who has to produce three specific failure stories before committing will occasionally not commit. Those non-decisions never appear in the journal, never show up in any return, and are invisible to every method of measuring whether the practice was worth keeping. The strongest argument for the eight lines is therefore one you will never be able to verify, which is an unsatisfying thing to be told and is nonetheless the honest position.
Eight lines. Every one of them exists because leaving it out makes the entry unreadable later.
Two of those do most of the work and are the two most often skipped.
Line 4 is skipped because the price feels like a detail once you have decided the thing is good. It is not a detail; a correct view about a business and an incorrect view about what it is worth produce exactly the same result as being wrong about the business.
Line 6 - the pre-mortem - is skipped because it feels like arguing against yourself at the moment you have finished deciding. That discomfort is the reason it works. Writing the failure as though it has already happened produces specific causes where asking 'what are the risks' produces a list of categories.
Because the practice fails on length, not on principle. Nobody disputes that recording reasoning is sensible; journals are abandoned because the entry took twenty minutes and the twentieth one took twenty minutes too.
Eight lines is roughly five minutes against a decision involving real money, which is a ratio that survives contact with a busy week. An entry that takes longer than the decision deserved will not be written the third time, and a journal with three entries in it teaches nothing at all.
And because the format is what makes the review possible. Entries written freehand are pleasant to write and almost impossible to compare - the pattern across twelve entries only becomes visible when line 5 is in the same place in all twelve.
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A completed entry, in full.
Two things worth noticing about the arithmetic in there. Line 2 fixes the size relative to the whole - 6,000 of 120,000 is 5.00%, and that percentage is what a future reader needs, because 6,000 means nothing on its own in three years' time. And line 5 contains an exit condition on the upside as well as the downside: if this position ever exceeds 10% of the portfolio, that is 12,000, which on 100 shares is 120.00 a share - a double - and the entry commits you to a decision at that price rather than to a feeling about it.
Note also what line 6 produced. Three specific failure stories, in order, one of which is 'I was right and paid too much' - which is exactly the failure the previous example in this subject actually suffered. Asking 'what are the risks of this investment' would have produced 'execution risk, customer concentration, valuation risk', which is the same content with all the useful specificity removed.
The specific wrong move is building a longer template because a longer one is more thorough.
Fifteen fields, a table of comparable companies, a section on the competitive landscape. The first entry is excellent, the second is good, the fourth does not get written, and the journal now contains three entries covering a period in which eleven decisions were made. Three entries cannot show a pattern, so the whole purpose is gone - defeated by thoroughness rather than by carelessness, which is why it is so hard to argue against while it is happening.
The second mistake is keeping it somewhere you do not go. A document you must remember to open is a document that gets opened during the enthusiastic month and never again. Put it where the decision already happens.
The third is writing the entry only when buying. The decisions not to act - the thing you looked at and declined, the position you considered adding to and did not - are the other half of a record, and leaving them out means the journal can only ever show you what your actions did, never what your restraint did.
Eight lines, the same eight every time, in the same order. Comparability across entries is the entire value, and it is destroyed by a format that improves each quarter.
6,000 tells a future reader nothing. 5.00% of the portfolio tells them how much conviction this actually represented, which is the thing you will want to know and the thing memory reliably distorts.
Not '60.00' but '15 times last year's earnings, which I am paying because the order book is contracted two years out.' The number alone is unreviewable; the comparison is the thesis about value, and it is separate from the thesis about the business.
'It failed. What happened?' rather than 'what could go wrong?'. The past tense forces specific causes - a plant ran late, a customer left - where the conditional produces categories. It is the same question and it gets different answers.
The threshold that says the thesis broke, and the size at which the position has to be reconsidered regardless of how well it is doing. A decision made in advance at a calm moment is worth considerably more than one made later at an interesting one.
A file beside the account, a note on the phone, a physical notebook on the desk. The right place is whichever one requires no act of remembering, because the entry competes with the moment of action and will lose.
The opportunity you declined and the position you did not add to are decisions with outcomes, and they are the half of the record that shows what restraint produced. Same eight lines.
For every decision involving an amount you would mind losing, including the decisions to decline and to do nothing.
Do not use it for routine scheduled contributions or for rebalancing to an allocation you already wrote down elsewhere. Those decisions were made once, in the plan, and re-recording them each month is how the habit turns into paperwork.
Records kept by individual investors overwhelmingly document purchases. The decision to look at something and decline it, the decision not to add to a falling position, and the decision to hold through a period when selling was tempting are decisions with real consequences and they are almost never written down. The resulting record can show what actions produced and can say nothing whatever about what restraint produced - even though, over a long enough period, restraint is where a great deal of the difference between investors is made.
Write the same eight lines for the things you decline and for the positions you deliberately leave alone. A declined opportunity that later tripled is a genuine entry with a genuine lesson in it, and without a record there is no way to tell whether declining was right.
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