A Step-by-Step Guide to Your First Investment Decision Journal
Learn how to create an investing decision journal to track thinking, avoid bias, and improve performance
TL; DR
An investing decision journal records the thinking, emotions, and assumptions behind every major investment.
It helps investors fight hindsight bias and improve decision-making quality over time.
Experts like Daniel Kahneman and Michael Mauboussin strongly recommend this practice.
A powerful journal structure includes context, problem, variables, alternatives, outcomes, emotions, and review.
Early in my investing journey, I bought a stock that doubled in less than a year. I felt brilliant. But when I later reviewed my notes — what little I had — I realized the price surge had nothing to do with my original thesis. I had gotten lucky, not smart.
Without a proper record of my thinking, I might have built dangerous overconfidence on a shaky foundation.
That’s when I started keeping an investing decision journal.
It changed the way I think, make decisions, and learn from every investment—whether I win or lose.
Let’s dive into how you can create your own.
What is an Investing Decision Journal?
An investing decision journal documents the reasoning, expectations, emotions, and context surrounding each significant investment decision. Instead of focusing on outcomes alone, it emphasizes the decision-making process, helping investors evaluate decisions based on the quality of their analysis rather than just the result. Nobel laureate Daniel Kahneman and other behavioral finance experts recommend decision journaling to improve self-awareness, reduce cognitive biases, and enhance decision quality over time.
Why do you need an Investing Decision Journal
In an interview with Shane Parrish of Farnam Street, investor Michael Mauboussin explained why keeping an investing decision journal is a powerful tool:
Many years ago when I first met Danny Kahneman, and Kahneman is one of the preeminent psychologists in the world who won a Nobel Prize for economics in 2002, even though he’s never taught an economics class.
When I pose him the question, what is a single thing an investor can do to improve his or her performance, he said almost without hesitation, go down to a local drugstore and buy a very cheap notebook and start keeping track of your decisions. And the specific idea is whenever you’re making a consequential decision, something going in or out of the portfolio, just take a moment to think, write down what you expect to happen, why you expect it to happen and then actually, and this is optional, but probably a great idea, is write down how you feel about the situation, both physically and even emotionally. Just, how do you feel? I feel tired. I feel good, or this stock is really draining me. Whatever you think.
The key to doing this is that it prevents something called hindsight bias, which is no matter what happens in the world. We tend to look back on our decision-making process, and we tilt it in a way that looks more favorable to us, right? So we have a bias to explain what has happened.
When you’ve got a decision-making journal, it gives you accurate and honest feedback of what you were thinking at that time. And so there can be situations, by the way, you buy a stock and it goes up, but it goes up for reasons very different than what you thought was going to happen. And having that feedback in a way to almost check yourself periodically is extremely valuable. So that’s, I think, a very inexpensive; it’s actually not super time consuming, but a very, very valuable way of giving yourself essential feedback because our minds won’t do it normally.
How to Create Your Own Investing Decision Journal
Creating an investing decision journal is one of the most powerful habits you can build to improve your thinking, manage emotions, and sharpen your judgment over time. It’s not just about tracking buys and sells — it’s about capturing how and why you made each decision, so you can learn from your successes and failures.
One of the strangest things about being human is that we can’t trust our own memories of what we were thinking. Not because we forget but rather because our brains actively edit the past to make us look better and smarter. —SHANE PARRISH
Here’s a proven structure you can use, inspired by Shane Parrish:
1. Situation or Context
Start by describing the environment at the time of the decision. What are the overall market conditions? Are there economic, political, or sector-specific factors influencing your thinking? Capturing context will help you later separate good decisions from good outcomes — and recognize when external factors played a big role.
2. Problem Statement
Clearly define the decision you are facing. Are you deciding to buy, hold, or sell? Are you reallocating capital? Specify the goal linked to this decision — growth, income, capital preservation, etc.
3. Variables and Complications
List the key factors impacting your decision — valuation metrics, competitive threats, macroeconomic risks, regulatory pressures, etc. Also, document any complexities, uncertainties, or unknowns you’re dealing with.
4. Alternatives Considered
Record the other options you seriously evaluated and explain why you chose not to pursue them. This prevents "tunnel vision" and strengthens your analysis.
5. Expected Outcomes
Project the possible results of your decision. Write down the expected return, timeframe, and potential risks. It's helpful to map out three scenarios: best case, worst case, and most likely case — and assign probabilities to each.
6. Reasoning and Rationale
Explain why you are making this decision. Include your key assumptions, the evidence you are relying on, and your confidence level. This part is critical for uncovering biases later.
7. Emotional and Physical State
Log your mental and emotional condition at the moment of the decision. Are you calm? Anxious? Excited? Tired? Recording this helps identify if your state influenced your judgment.
8. Outcome and Review Date
Commit to reviewing the decision at a set time — typically 6 months or 1 year later. Compare what actually happened to your original expectations. Analyze what you got right, what you missed, and what you can learn for next time.
Extra Questions to Enrich Your Journal
If you want to take your journal even deeper, consider answering these powerful questions:
What is my core investment thesis?
What second- and third-order consequences might arise?
What is my downside risk, and why am I comfortable with it?
What upside could exist beyond my main thesis?
What emotions am I experiencing during this decision?
What is the opportunity cost of this choice?
What unique edge or insight do I have here?
Who would be the ideal person to make this decision?
How will this decision look in 5 weeks, 5 months, and 5 years?
Tips for Using a Decision Journal Effectively
Keeping a decision journal is powerful—but using it well is what unlocks real growth. Here’s how to maximize its impact:
1. Be Consistent
Use your journal for every major investment decision, not just the ones that feel exciting or high stakes. Consistency builds a reliable, honest record of your thinking over time—and reveals your patterns, strengths, and blind spots more clearly.
2. Set Regular Review Dates
Schedule regular reviews of your past entries—ideally every six months. Analyze the outcomes and look for recurring biases, blind spots, or decision patterns. Reviewing helps you spot mistakes early and refine your process while memories are still fresh.
3. Use Clear, Direct Language
Avoid vague language like "it felt right" or "seemed like a good opportunity." Instead, be specific about your reasoning, assumptions, and emotions. Precision now will make future reviews more insightful and brutally honest.
4. Focus on the Process, Not Just Outcomes
A good decision doesn’t guarantee a good result—and a bad outcome doesn’t always mean a bad decision. By emphasizing how you made the decision, not just whether it made money, you build a feedback loop that improves judgment under uncertainty.
Example of a Decision Journal Entry
Date: April 10, 2023
Investment Decision: Buy 100 shares of XYZ Corp.
Context: Market sentiment is optimistic following a recent tech rally. XYZ Corp. has launched a new AI product, generating positive media coverage and analyst upgrades.
Problem Statement: Decide whether to buy shares in XYZ Corp. to capitalize on projected growth in the AI sector.
Variables and Complications:
Growth Projections: Analysts predict 20% annual growth, but these estimates could be inflated by market hype.
Regulatory Risk: Potential for increased AI regulation poses a risk to profitability.
Competitive Landscape: XYZ competes with larger players that have more resources.
Alternatives Considered:
Buying smaller tech stocks: Considered diversifying across several smaller companies in the sector but decided to focus on XYZ due to its leadership position in AI.
Waiting for a pullback: Considered waiting for a price dip but chose to invest now, as current growth catalysts appear strong.
Expected Outcomes:
Best Case: 30% appreciation within one year as AI products gain traction.
Worst Case: 15% decline if the AI product faces delays or regulatory issues.
Most Likely Outcome: 15-20% gain as the AI market continues to expand.
Rationale: High confidence in XYZ’s innovation track record and market position. While regulatory risks exist, XYZ has a proactive compliance team, which reduces my concerns.
Emotional and Physical State: Feeling optimistic but cautious. I’m aware of the excitement around AI stocks, which could bias my decision.
Outcome Review Date: October 10, 2023
Build Your Own Investing Decision Journal (Free Template)
Want to start making smarter, more disciplined investment decisions? I’ve got you covered.
I’ve created a simple, step-by-step Investing Decision Journal Template to help you track your thinking, improve your judgment, and learn from every investment.
It’s free, easy to use, and designed to sharpen your process—regardless of the outcome.
Want a Smarter Way to Track Your Decisions?
If you prefer a digital solution, I highly recommend trying Journalytic — an online investment decision journal built specifically for serious investors.
It’s designed to help you:
Record decisions systematically
Track your thinking over time
Uncover emotional biases and recurring patterns
Analyze your process, not just your outcomes
100% FREE TO USE
This is great. I also have follow-up triggers based on news releases or stock price swings.