George Orwell’s Shooting an Elephant is in many ways a difficult read. There are terms in there that are offensive. Characterisations that can’t help but make you cringe at the anachronisms.

Yet there is a line that I haven’t been able to stop thinking about since I first read it. A line that comes to mind during my more reflective moments. “He wears a mask, and his face grows to fit it.” I’m hard pressed to think of a better characterisation of what it is to age. To become an adult. It is a poignant description of taking on responsibilities that feel unnatural.

I think about that quote every time I give a presentation. They generally go decently and kind people come up to me afterwards and talk about how natural I am at public speaking. I graciously thank them. I make some quip about how it was nothing. It isn’t nothing.

It is hard to describe how shy I was as a kid. It wasn’t just presenting that terrified me. The thought of speaking in class or having to speak to someone I didn’t know would consume me to the point of paralysis.

And in some sense, I’ve managed to get over it. Partially from being forced to present. Partially from just the natural process of aging. But that shy kid is always there. Public speaking and certain social settings are always going to feel unnatural. The person I’ve apparently become is always going to feel a bit unrecognisable.

How our past experiences shape our investing approach

There is a point to this deviation into my awkward childhood. After one of these presentations, I reflected on my transformation from a shy kid to a shy adult who manages to conceal it a bit better.

It occurred to me that none of our actions occur in isolation even if it appears that way to outside observers. We drag baggage throughout our life that influences the way we act. Baggage that compounds as we age. The influence of the past over our investment approach is no different.

Our investing baggage starts as children. Our parents’ relationship with money and investing are a lasting influence. There are no facts about long-term returns that can easily overcome a childhood spent listening to comparisons of investing with gambling. Hearing about how it is only something for “other” people.

A reader of this article is likely to be an investor. Someone that grew up in a household where investing was something for “us.”

Or perhaps you are someone that overcame a familial reluctance to venture beyond the safety of a savings account. Taking the plunge in the share market is just the start of amassing baggage.

Your early experiences as an investor will impact the way you invest for the rest of your life.

Many new investors choose to jump in at the end of a bull market. The subsequent failure of the markets to live up to those lofty standards drives many of these investors away. The ones that stay carry scars.

And staying invested for the long-term is the key to investing success. Yet so many of us fail at this simple test of patience. We churn our portfolio more and more. And it is too our detriment. The average investor holds a share for 5.5 months according to Reuters. And this wasn’t always the case. In the 1950s the average holding period was 8.8 years.

Self-awareness is the key to investing success

Over time, I’ve developed an awareness of how my past experiences may be limiting my present. And now is the right time for some self-reflection. There is so much angst about where we go from here. Is inflation under control? Will interest rate increases push us into recession?

A sense check at the heights of a bull market is likely to be heavily influenced by greed. The exercise may deviate into an intellectual justification for taking on more risk. Fear will influence a sense check done at the depths of a bear market.

As someone who started investing in the midst of the .com bubble I have an almost visceral reaction to anything with a whiff of speculation. In many ways I think this is a good thing. But this limits the universe of investments I would consider. I’m an advocate for investors writing things down and linking a set of goals to an investment strategy using an investment policy statement (“IPS”). After going through this exercise reflect on how your experiences influence your IPS.

My next bear market has also heavily influenced my investing approach. I entered the GFC with large positions in two US banks. Washington Mutual and Citigroup were not exactly fly by night operations. And I thought they would be fine despite my worry about what was happening with residential real estate in the US.

I assumed that the risk was offloaded as the loans were securitised and sold to investors. It wasn’t. And even the attempts at risk mitigation through complex derivatives was just a giant game of hot potato between global financial institutions.

After the carnage I decided that there was no point on investing in a bank if I couldn’t figure out what they were holding on their balance sheet and the details of their loan book. Another category of shares that wouldn’t get my money. An exclusion that makes investing in Australia an interesting proposition.

Spend some time reflecting on your own baggage and how it is holding you back. Have you amassed wisdom? Are you simply unproductively shaking your fist at a group of investments that don’t meet your self-imposed standards? Think about how you’ve come up with your investing strategy.

Don’t judge your individual mistakes because they are inevitable. Look for patterns. Try and discern what is influencing your decisions. Make sure that you’re not just justifying a series of irrational decisions.

Remember the point of investing

Investing is about taking on risk. Outcomes are uncertain and the returns we earn are compensation for that uncertainty. However, that uncertainty shouldn’t extend to your overall investment approach. We get in trouble as investors when we don’t fully understand or consider why we are doing something. A lack of faith in your approach makes it far more likely that you will succumb to the emotions induced by volatility and abandon your strategy at the wrong time.

A young George Orwell shot an elephant in present day Myanmar because that was what was expected by the colonised and the coloniser. The baggage from a generation of colonialism had influenced those expectations.

Yet the incident was also an opportunity for Orwell to reflect on the mask his face had grown to fit. I would encourage you to engage in some self-reflection about the investing baggage you carry.

I’m curious what you come up. Shoot me an email and let me know at [email protected]

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