My Sunday Washington Post Business Section column is out. This morning, we look at the differences between Outcome or Process focused investors.

The print version had the full headline Investing’s smart minority: The process people while the online version Outcome or process — what investment focus succeeds over time?.

Here’s an excerpt from the column:

“Has this ever happened to you?

In the course of a conversation, you learn about an acquaintance or colleague who made an unusually successful investment. For whatever reason, they put capital at risk into XYZ and the returns were extraordinary — far more than what is typical for your investment returns.

In that situation, which of the following comes closest to your immediate thoughts?

(1) I wish my 401(k) was filled with XYZ !

(2) If only I had his access to his inside information.

(3) How much time and effort goes into his research?

(4) What does his win/loss ratio look like? Gains vs. losses over time?

(5) Sounds like he got really lucky.”

The conceit of the article is that your answer reveals the type of investor you are likely to be, and suggests why one is superior to the other.

The Post did a very nice job in the dead tree version of the paper — the layout from page 1 of the Business section to the jump on page 4 really works.



Outcome or process — what investment focus succeeds over time?
Barry Ritholtz
Washington Post, February 23 2014  

Category: Apprenticed Investor, Psychology

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2 Responses to “What Kind of Investor Are You?”

  1. faulkner says:

    Excellent points all. I especially like the examples of thinking. (1) “I wish …” and (2) “If only …” are wonderful examples of System 1 language and its magical thinking.

    Many nvestors inability to apply an outcome/process dichotomy comes from mistaking stories for strategies. Stories are judged by how they end. Strategies by their processes as well as outcomes. Strategies are a higher level, effortful System 2, kind of thinking. And thinking about various strategy processes is meta to that. All of which is to say, thinking in terms of process is a skill built up out of making more distinctions in lower level kinds of thinking. Your piece offers many examples of places to start.

  2. sellstop says:

    Why, number four, of course