This is the editorial of our monthly Shareholder Yield Letter published on 10 December 2024.
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Are you tired of chasing short-term gains only to feel stuck or disappointed? This article explains why focusing on a repeatable, disciplined investment process—like the Shareholder Yield strategy—can transform your investing results.
You will learn how prioritizing process over outcomes protects you from market noise, keeps emotions in check, and sets you up for long-term success. With real-world examples and actionable steps, this post helps you build a portfolio designed to weather volatility and deliver steady growth. Don’t just invest—invest smarter by mastering your process.
Estimated Reading Time: 6 minutes
Process Over Outcome - Your Key to Long-Term Investing Success
"If you can’t describe what you are doing as a process, you don’t know what you’re doing." – W. Edwards Deming
Why Most Investors Get Stuck
When evaluating an investment, what’s the first thing you look at?
If you’re like most investors, you probably ask: “What are the returns?” That’s natural. Results are tangible. They’re exciting. But they can also be misleading. Focusing solely on outcomes—like the latest performance numbers can lead you to make impulsive decisions, chase trends, and abandon strategies at the worst times.
The smarter approach? Focus on the process.
Here’s why. Good results come and go. A sound process, built on enduring principles, keeps you on track regardless of short-term market noise.
Why Process Beats Performance
The Shareholder Yield strategy is a perfect example of why process matters more than returns.
This approach identifies companies that prioritize returning cash to shareholders through dividends and buybacks. These are not flashy growth stocks dominating today’s headlines—they’re disciplined businesses focused on delivering steady, shareholder-friendly results.
At first glance, this strategy might not look glamorous or even boring, especially when markets reward speculative growth. But the process works over the long term.
Companies with high shareholder yields historically outperform because they are built on strong fundamentals. They generate cash, allocate capital wisely, and reward their owners. The Shareholder Yield Letter finds these companies for you consistently and is not swayed by temporary market fads.
How Process Protects You in Tough Markets
Let us take a real-world example. Imagine you invested in shareholder-friendly companies in 1999, avoiding the dot-com frenzy. For three years, you’d feel like a fool as speculative tech stocks soared. But when the bubble burst, your disciplined process protected you while others lost everything.
The same principle applies today. If you avoided overvalued FAANG stocks in recent years, your returns might lag the S&P 500.
Does this mean your strategy is broken? Absolutely not. It means you’re investing for the long term, not chasing short-term gains.
What Does a Good Process Look Like?
The Shareholder Yield Letter is a clear example of a good investment process. It gives you a clear, repeatable process to get high returns.
As a reminder, this is how it works:
- Filter for High Shareholder Yield: Identify large-cap companies returning capital through dividends and buybacks. These are resilient businesses with stable cash flows.
- Evaluate Fundamentals: Beyond yield, focus on financial health, valuation, and consistency. This ensures you’re buying quality, not just high payouts.
- Hold with Discipline: Stick to the strategy, even during periods of underperformance. Remember, short-term pain is the price of long-term success.
This process is systematic and transparent. It removes emotion from investing, helping you stay committed through the inevitable ups and downs.
Falling in Love with Your Process
As you may have realised, the hardest part of investing isn’t finding a good strategy—it’s sticking to it. Even the best strategies go through tough periods, making it tempting to abandon ship.
That is why you need to love your process, not just your results.
Why?
Because outcomes take time and cannot be controlled directly. A well-run company focused on shareholder returns might not shine in speculative bull markets, but over a decade, it delivers exceptional gains. Falling in love with your process means embracing the journey, not just the destination. It means trusting the principles behind your strategy and committing to them even when it’s uncomfortable.
Avoiding the Pitfalls of Outcome-Driven Investing
Chasing short-term performance is a recipe for disaster. Here are the most common traps:
- Switching Strategies Too Often: Moving from one hot idea to the next guarantees you’ll buy high and sell low.
- Overreacting to Market Noise: Headlines and quarterly results lead to emotional decisions that hurt long-term performance.
- Ignoring Fundamentals: Without a process, you risk investing based on hype rather than substance.
By focusing on your process, you sidestep these traps. You’re not chasing returns—you’re building a portfolio designed to weather storms and grow steadily over time.
The Long-Term Payoff
You know investing is a marathon, not a sprint. The connection between process and results often takes years to reveal itself. But when you trust a strategy built on sound principles—like shareholder yield—you give yourself the best chance of achieving sustainable success.
At the end of the day, outcomes are beyond our control. Markets will rise and fall. Trends will come and go. But your process? That’s the one thing you can control. And when it’s rooted in discipline, research, and long-term thinking, it’s all you need.
At its core, the Shareholder Yield Letter is about transformation. It’s not just about growing your portfolio; it’s about gaining clarity, confidence, and peace of mind in your investment decisions. By focusing on the process, you will transform the way you think about investing—moving from stress and uncertainty to control and purpose.
Your analyst wishes you profitable investing!
7 Frequently Asked Questions (FAQs) About the Importance of Process in Long-Term Investing
1. Why is focusing on process better than chasing returns?
Focusing on returns can lead you to chase trends, make emotional decisions, or abandon strategies when markets get tough. A sound process, like investing in shareholder-friendly companies, keeps you disciplined and ensures your decisions are based on long-term principles—not short-term noise. Returns fluctuate, but a solid process gives you stability.
2. How do I know if my investment process is strong enough?
A good process is clear, repeatable, and rooted in sound principles. For example, the Shareholder Yield strategy screens for companies with high shareholder returns, evaluates their fundamentals (like financial health and valuation), and holds investments with discipline. If your process isn’t transparent or feels too emotional, it may need refinement.
3. What happens when my process underperforms for a while?
Underperformance is normal in any strategy, especially during speculative bull markets when trendy stocks dominate. This doesn’t mean your process is broken. For example, companies focused on shareholder yield might lag in the short term but deliver strong results over a decade. Stick with your strategy—it’s the long-term performance that matters.
4. How does a process protect me in a market crash?
A disciplined process prevents you from overreacting to market noise. For example, during the dot-com bubble in the late 1990s, investors who stuck to shareholder-friendly companies avoided huge losses when speculative tech stocks crashed. A solid process ensures you don’t overpay for hype and protects your portfolio during downturns.
5. How do I avoid jumping between strategies when markets are volatile?
The key is falling in love with your process, not just the results. Understand why your process works and commit to it, even when it’s uncomfortable. Jumping between strategies guarantees buying high and selling low, which destroys long-term returns. Build confidence in your strategy by focusing on fundamentals and its historical success.
6. What’s the biggest mistake I can make as a personal investor?
The most common mistake is chasing short-term performance—switching strategies, reacting to headlines, or investing based on hype instead of research. These behaviors lead to poor decisions and missed opportunities. By sticking to a process like shareholder yield, you avoid these traps and build a resilient portfolio.
7. How do I stay confident in my strategy during tough times?
Confidence comes from understanding and trusting the principles behind your process. For example, shareholder yield focuses on companies that generate cash, reward investors, and manage capital wisely. Remind yourself that short-term pain is the price of long-term success. Over time, this approach transforms not just your portfolio but also your mindset—giving you peace of mind.
