Category: Stage2

There Are Only Two Ways To Become A Better Investor

There Are Only Two Ways To Become A Better Investor

Most investors spend their entire lives trying to make better decisions.

They read more books.

Study more charts.

Follow more experts.

Analyze more data.

The objective is simple:

Make better investment decisions.

There is nothing wrong with this approach.

But there is another path that many investors overlook.

You can either:

  • Make better decisions.
  • Make more decisions.

Understanding the difference changed the way I think about investing.

The Formula Behind The Idea

In portfolio management, there is a well-known relationship:

Information Ratio = Skill × Breadth

You do not need to understand the mathematics behind the formula to understand its message.

The formula says that investment performance comes from two sources:

  • The quality of your decisions.
  • The number of opportunities you have to apply that skill.

I prefer to think about it in plain English.

Better decisions.

Or more decisions.

My First Investing Framework

In the early years of my investing journey, I focused almost entirely on making a few high-conviction decisions.

One example was my investment in GAS after oil prices experienced a significant decline.

I spent time studying the industry.

I built a thesis.

I developed strong conviction.

The entire outcome depended on a relatively small number of decisions.

This approach has one attractive feature.

If you are right, the rewards can be significant.

It also has one major weakness.

If you are wrong, there are very few opportunities to recover.

Your results become heavily dependent on a handful of large bets.

What Changed

Over time, my thinking evolved.

Trading, options, and even poker exposed me to a different framework.

I became less interested in finding a few perfect opportunities.

I became more interested in creating a process that could be repeated consistently.

Instead of asking:

How can I make this one investment work?

I started asking:

How can I make hundreds of decisions with a small edge?

This shift fundamentally changed my approach.

Poker players understand this naturally.

The objective is not to win every hand.

The objective is to make enough good decisions over a large number of hands.

The same principle applies to investing.

Two Paths

Every investor eventually chooses one of two paths.

Path One: Increase Decision Quality.

This path focuses on research, analysis, expertise, and insight.

The goal is to improve the accuracy of each decision.

Many successful value investors follow this approach.

Path Two: Increase Breadth.

This path focuses on process, repetition, and scale.

The goal is to apply a small edge across many independent opportunities.

Many systematic traders and option sellers follow this approach.

Neither path is inherently superior.

The important thing is understanding which game you are playing.

The Question Most Investors Never Ask

Most investors spend years searching for better opportunities.

Very few stop to ask:

Am I trying to improve my decisions, or increase the number of decisions I make?

The answer influences everything.

Your strategy.

Your process.

Your portfolio construction.

Even your expectations.

An investor making five decisions per year needs a very different framework from an investor making five hundred decisions per year.

Reader Exercise

Think about your own investing approach.

Which description sounds more like you?

A. I make a small number of high-conviction decisions.

B. I make a large number of repeatable decisions with a small edge.

C. I am trying to combine both.

There is no universally correct answer.

But understanding your answer may help you understand your investment process more clearly.

Final Thought

One of the biggest changes in my own investing journey was realizing that performance does not come from a single source.

It comes from a combination of decision quality and decision frequency.

Some investors win through exceptional insight.

Others win through disciplined repetition.

Most successful investors eventually develop a balance between the two.

The important question is not which path is better.

The important question is whether you know which path you are currently following.

Related Articles

▶ Watch on YouTube
Japanese Restaurants, Options Trading, and the Power of Focusing on One Variable →

Japanese Restaurants, Options Trading, and the Power of Focusing on One Variable

Japanese Restaurants, Options Trading, and the Power of Focusing on One Variable

During a recent trip to Japan, I found myself repeatedly impressed by something that had nothing to do with finance.

It was the restaurants.

Many of them are surprisingly small. The décor is often minimal. The menus are short. There are no unnecessary distractions competing for attention. Yet these restaurants consistently deliver what matters most: a delicious meal.

The more I observed, the more I realized that the underlying philosophy is remarkably similar to successful investing.

Observation: Simplicity Is Not the Absence of Sophistication

From the outside, a Japanese restaurant can appear almost too simple.

A small space. A limited menu. A focus on a handful of dishes.

However, simplicity should not be confused with lack of sophistication. In many cases, the opposite is true. By eliminating distractions, resources can be concentrated on the single outcome that matters most.

The objective is clear: serve great food.

Everything else is secondary.

Unfortunately, investors often do the opposite. They become distracted by market narratives, predictions, macroeconomic debates, social media opinions, and countless indicators. The result is a process that becomes increasingly complicated while adding little value to actual investment outcomes.

Explanation: Every Strategy Has One Core Objective

In trading, there are only two variables that ultimately matter:

Return and risk.

Everything else is merely an input into those two outcomes.

This idea became particularly relevant in my own options trading this year.

When volatility was historically depressed, I focused on one question:

What is the relationship between the premium being offered and the risk being taken?

Not the latest market prediction.

Not the most popular narrative.

Not where Bitcoin might trade next month.

The focus was simply on whether volatility was being priced attractively relative to risk.

That led me to establish long volatility exposure when implied volatility was unusually low. When volatility later expanded, the position performed as expected.

The trade itself is not the important lesson.

The important lesson is that the decision framework remained simple.

Rather than analyzing dozens of variables simultaneously, the process was anchored to a single objective: identify situations where the expected return adequately compensated for the risk assumed.

Implication: Investors Often Need Less, Not More

Many aspiring traders believe better performance comes from more complexity.

More indicators.

More models.

More forecasts.

More information.

My experience increasingly suggests the opposite.

The most effective investors often possess an unusual ability to ignore what does not matter.

Just as a great restaurant focuses relentlessly on the quality of the meal, a great investment process focuses relentlessly on the relationship between return and risk.

That does not mean the work is easy.

In fact, maintaining simplicity is often harder than adding complexity.

But simplicity creates clarity. Clarity improves decision quality. And over time, better decisions compound.

Whether evaluating a restaurant, a business, or an options strategy, the question remains surprisingly similar:

What is the core objective, and are we allocating our resources toward achieving it?

Everything else is noise.

← There Are Only Two Ways To Become A Better Investor ▶ Watch on YouTube Why Low Win Rates Can Still Win the FTMO Game →