Process versus results
One of the hardest things to do when investing is to keep my focus on process instead of results.
Does that mean that results are unimportant? No. But, it does mean that an over-emphasis on short term results can prevent me from achieving truly unique investing performance.
I find that an analogy, here, helps me grasp this difference. I believe that being honest is necessary to achieving happiness. But, being honest at any particular time does not mean that happiness will instantaneously follow. Honesty is a virtue–like all others–that yields results over the fullness of time.
It seems that everyone has heard of an unscrupulous salesperson that has made a fortune while being less than honest. Such salespeople may do very well in the short term, but over the long term they’re going to pay the price for treating others poorly. It may take decades for this price to be paid, but rest assured that it’s always paid.
The same is true with investing. Those who focus on short term results seem to always be chasing the latest hot thing. They inevitably end up buying high and selling low because they are too focused on results and not enough on process.
Generating truly excellent investment results over the fullness of time requires an intense focus on process: the process of researching, analyzing, valuing, purchasing and selling partial ownership of businesses. Any focus on short term results that distracts an investor from this process will lead to sub par results. An intense focus on short term results will lead to disastrous decisions. Trust me, I’ve made them myself.
It’s hard to focus on process at times. Sometime an investment’s price will go down as business value goes up. Sometimes price will go up much faster than underlying value. Price is important, but it can distract you from underlying value.
The key is to have a process and discipline that you know will work, and to make sure you don’t get distracted by short term results when you know long term results are what’s important.
Even after 11 years of investing, I still find myself getting distracted by short term results. What do I do? I realize I’m letting it happen, then promptly and none too gently refocus myself back on the process. And, so far, that works.
Nothing in this blog should be considered investment, financial, tax, or legal advice. The opinions, estimates and projections contained herein are subject to change without notice. Information throughout this blog has been obtained from sources believed to be accurate and reliable, but such accuracy cannot be guaranteed.