One of the more humbling exercises in our industry is practicing the ability to self-evaluate. Not the polished kind of self-evaluation that appears in marketing materials or the discussion points we prep for meetings, but real, unfiltered self-reflection. Most portfolio managers know what they own. Some can explain why they bought it. But very few take the time to ask: how did that decision actually turn out?
The truth is that most portfolio managers spend far more time looking through the windshield than the rearview mirror. Most of the time, that’s a good thing. We track what’s happening right now: what macro theme is developing, what fund is lagging. But rarely do we revisit our past trades, analyze them in aggregate, and ask the question, “Am I actually adding value through my decisions?”
That’s where the concept of the “Mirror Test” comes in. The suggestion is not to make this an everyday thing, but at least at the end of each year, what if you held up a mirror and asked, “What would performance have looked like if I had just done nothing?” No trades. No shifts. Just let the portfolio ride. This is something we do for our portfolios, and in essence, some years are better than others, but we do learn quite a few things about our decision-making process.
As an example, below is a chart of one of the highest-turnover Canadian equity managers in the country. The grey line is their actual performance. The purple line is what would’ve happened had they made zero trades all year and simply held the portfolio as it was on January 1st. The fund still performed rather well, but the self-inflicted drag on alpha highlights how much stronger the results could have been.
This isn’t to suggest that trading is bad or that doing nothing is superior. There are plenty of valid reasons to adjust portfolios, from manager changes to outlook shifts. But it does highlight a powerful idea, one that echoes the core of the Hippocratic Oath in medicine: First, do no harm. Before rushing to make changes in response to markets or narratives, are we certain those decisions improved the portfolio, or were we just interrupting it?
One tool to help in your evaluation process is a journal. Keeping tabs on real-time portfolio decisions, what the market was doing, what you were thinking, and why you made the move brings a new level of clarity in your process.
And thanks to A.I., these journals no longer just sit on a shelf. They can become interactive, searchable records of your process. You can ask, “How many times did I trim U.S. equities during volatility spikes?” or “What was my thesis when I added duration last fall?” Instead of relying on gut feel or vague memory, the answers are right there, ready to challenge or confirm your instincts. Capturing your decisions gives you something to reflect on when you hold up that mirror.
Even more useful is revisiting that journal through the lens of conviction. Not every trade is created equal. Some are high-conviction moves, tied to a clear macro view or a thesis that aligns with your overall positioning. Others are more reactive, low-conviction adjustments made in response to a client call, a flashing headline, or a short bout of underperformance. In those moments, the pressure to act often outweighs the clarity of why you’re acting.
But over time, a journal reveals your patterns, what types of trades tend to work, and which ones quietly chip away at performance. It doesn’t mean you stop trading; it just means you stop trading blind. One of the more surprising benefits of a decision journal is how it slows things down. And sometimes that pause is enough to save you from a move that doesn’t align with your process. You’d be surprised how many trades, once written out, no longer feel necessary.
We’ve always believed portfolio management is a discipline best measured over years, not days. But it’s hard to improve what you don’t track. Looking back at performance is one thing; understanding why it happened is another. The mirror shows you the outcome. The journal tells you the story. And the conviction shows you whether the story was even yours to begin with.
Final Thoughts
Everyone makes a few bad calls here and there. But there’s a big difference between making a mistake and never learning from it. In a world obsessed with what’s next, the best managers don’t just move forward; they consider the whole picture. They hold up the mirror. And over time, they make fewer bad decisions, not by being smarter, but by being more aware.
And if you're curious how your own decision-making stacks up, run the mirror test. You might be surprised by what you see.
— Brett Gustafson is an Associate Portfolio Manager at Purpose Investments
Sources: Charts are sourced to Bloomberg L.P.
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