Making ongoing smart decisions requires us to separate the outcome from the decision making process.
If I made the right decision, but did not get the outcome I was hoping for, it doesn’t mean I made a bad decision.
And it’s entirely possible to make a BAD decision, but come out ahead.
For instance, I do not believe in speculative investing for anything but “funny money” accounts.
Therefore, we don’t include any investments in our strategy that don’t PRODUCE value.
Stocks – aka companies – produce goods and services that are valuable to the world.
So when you invest in a stock, you are investing in the production value of their goods or service.
Alternately, something like gold (or crypto) does not produce anything. Therefore, it’s a speculative asset, not an investible one.
You MAY sell it to your neighbor tomorrow for more than you paid today, but not because it produced anything useful.
The way Ray Dalio evaluates his decisions is based on whether he followed the decision making process, NOT by judging the outcome.
He knows if you make 1,000 decisions according to your process, you’ll come out much further ahead than by trying to bet on the outcome.
And finally to bring it home, this is why we recommend de-risking even high-flying company stock.
The outcome – the stock has crushed it lately – is not the decision lever.
The principle of not concentrating 50% of your financial future on one stock is what drives the decision to sell and de-risk.
Rest assured, Ray Dalio would be proud of you for selling.
