1. As a long-term investor, the "process approach" to making money and creating wealth should always take precedence over the "outcome approach".
2. In the "process approach", the mind is set on returns by seeking to make money from a business that holds the promise of strong future earnings.
3. In the "outcome approach", the focus is capital, and the intent is to make money work hard and fast, cut losses and move on to running faster.
4. The dilemma of the simple investor is that he would like to short-change the tough "selection process" and seek "quick names" to invest in.
5. The long-drawn "selection process" may not be as easy as it seems for it requires a good understanding of the company and the business, the ability for a sharp analysis of data and the skill to forecast, and is underestimated by most.
6. Anyone who has been a part of an investment process in an institutional set-up will vouch for the complexities, the huge requirement for information, and the constant need to cross-check, verify and revisit assumptions made.
7. To these "process-driven" professionals, the courage with which "outcome-driven" investors buy on the basis of "tips and names" can only seem audacious and dependent on getting lucky.
8. For the pure "outcome-approach" investor, there is no market view, and all that he knows is the products that work and those that don’t.
9. On the other hand, a "process-driven" investor will take a market view because he is handling an allocated asset portfolio that should deliver a return in alignment with a financial goal, with a defined level of downside risk it can take.
10. Therefore, his portfolio would be constructed to hug the benchmark a bit, while trying to do better, without resorting to frequent "churns and switches" for "maximum outcome" at all times.
11. Long-term investors know that there is no formula for picking winners, that they will be fine on an average, and hence, keep their return expectations normal to beat inflation, earn more than the bank deposit rates, and build reasonable wealth.
12. Getting to this number involves a few losing picks and a few multi-baggers, and long-term investors know this is the process to build wealth.
13. They do not insist that each investment earn a high rate of return every year.
14. As someone said, "Doing ordinary things at an ordinary time could give you extra-ordinary results."
15. To add, Peter Lynch too said, "Buying a company with mediocre prospects just because the stock is cheap is a losing technique."
16. Investment is, therefore, a long-term process-driven approach, which also mixes discipline, intelligence and experience, that can extend for decades.
17. Gaining wealth is a slow process - earning it too quickly may make you rich, but it does not give you experience in acquiring wealth - which is vital for keeping and growing that wealth.
2. In the "process approach", the mind is set on returns by seeking to make money from a business that holds the promise of strong future earnings.
3. In the "outcome approach", the focus is capital, and the intent is to make money work hard and fast, cut losses and move on to running faster.
4. The dilemma of the simple investor is that he would like to short-change the tough "selection process" and seek "quick names" to invest in.
5. The long-drawn "selection process" may not be as easy as it seems for it requires a good understanding of the company and the business, the ability for a sharp analysis of data and the skill to forecast, and is underestimated by most.
6. Anyone who has been a part of an investment process in an institutional set-up will vouch for the complexities, the huge requirement for information, and the constant need to cross-check, verify and revisit assumptions made.
7. To these "process-driven" professionals, the courage with which "outcome-driven" investors buy on the basis of "tips and names" can only seem audacious and dependent on getting lucky.
8. For the pure "outcome-approach" investor, there is no market view, and all that he knows is the products that work and those that don’t.
9. On the other hand, a "process-driven" investor will take a market view because he is handling an allocated asset portfolio that should deliver a return in alignment with a financial goal, with a defined level of downside risk it can take.
10. Therefore, his portfolio would be constructed to hug the benchmark a bit, while trying to do better, without resorting to frequent "churns and switches" for "maximum outcome" at all times.
11. Long-term investors know that there is no formula for picking winners, that they will be fine on an average, and hence, keep their return expectations normal to beat inflation, earn more than the bank deposit rates, and build reasonable wealth.
12. Getting to this number involves a few losing picks and a few multi-baggers, and long-term investors know this is the process to build wealth.
13. They do not insist that each investment earn a high rate of return every year.
14. As someone said, "Doing ordinary things at an ordinary time could give you extra-ordinary results."
15. To add, Peter Lynch too said, "Buying a company with mediocre prospects just because the stock is cheap is a losing technique."
16. Investment is, therefore, a long-term process-driven approach, which also mixes discipline, intelligence and experience, that can extend for decades.
17. Gaining wealth is a slow process - earning it too quickly may make you rich, but it does not give you experience in acquiring wealth - which is vital for keeping and growing that wealth.