Mohnish Pabrai on Maximizing Returns and Avoiding Mistakes
- After getting his "head handed to him" in 2008 with his funds down 60% versus 38% for the market, he did some soul searching trying to figure out what his investment approach was missing.
- To improve his performance he undertook a study of great investors and specifically looked into instances where they incurred a permanent loss of capital (he also looked into his own mistakes).
- He was surprised to discover that in most instances it could have been apparent at the time of investment that a permanent loss of capital was quite possible from these investments and additionally the reason for the loss was quite basic.
- From his documentation of these losses he developed a checklist that forced Monish to consider these basic issues prior to investing.
- His checklist has 97 or 98 questions and it forces him to consider these issues prior to investing.
- He believes his checklist has significantly brought down his error rate.