The taxonomy, sorted by the thing that matters#
Forget the labels for a second and look at the axis underneath them.
| Type | Holding period | Risk |
|---|---|---|
| Value | Decades | Low–Medium |
| Dividend / Income | Decades | Low |
| Index | Decades | Low–Medium |
| Real estate | Decades | Medium |
| Growth / GARP | 5–10 years | Medium–High |
| Angel | 7–10 years | Extreme |
| Contrarian | Variable | Medium–High |
| Gold | Variable | Medium |
| ESG | Long-term | Medium |
| Crypto | Variable | Very High |
| Momentum | Days–Months | High |
| Options | Days–Weeks | Extreme |
| Day trader | Hours | Very High |
| Quant | Milliseconds–Months | Variable |
Read the column, not the names. Everything with a horizon measured in decades sits at low-to-medium risk. Everything measured in hours or days sits at very high or extreme. The one genuine exception proves the rule, and we’ll get to it.
The decades group is doing one thing#
Value investors hunt companies trading below intrinsic value — “a $100 bill selling for $60” — read annual reports, calculate a margin of safety, and hold effectively forever.
Dividend investors want the portfolio to pay them, buying steady raisers like Coca-Cola and Johnson & Johnson, treating holdings like rental property where the tenant pays reliable rent. $500,000 at a 4% yield produces $20,000 a year in cash.
Index investors buy the whole market, automate contributions, and check once a year. Buffett’s direct advice is to consistently buy a low-cost index fund and beat almost everybody over time — the position his ten-year bet against a group of hedge funds vindicated.
Different methods, same underlying wager: that businesses generate value over long stretches and that you’ll still be holding when they do. The differences between them are matters of taste. The similarity is the strategy.
The hours group is doing something else entirely#
Day traders are in at the open and out before dinner, sometimes fifty trades a day, reading one-minute candles.
The data on this is not ambiguous. Chague, De-Losso and Giovannetti tracked every individual who began day trading Brazilian equity futures between 2013 and 2015. Among the 1,551 people who persisted for more than 300 trading days, 97% lost money net of fees. Only 1.1% earned more than the Brazilian minimum wage. The top performer averaged $310 a day with a standard deviation of $2,560 — noise dwarfing signal.
The finding that matters most: no evidence of learning. Traders did not improve with experience. The ones who kept going simply kept losing, which removes the usual “you just need more screen time” defence.
Options traders occupy the same territory with an expiry clock attached — small capital controlling large positions, one right bet multiplying an account, one wrong bet zeroing the stake. Michael Burry famously used options to short the housing market, which is the example everyone cites and nobody generalises from correctly: Burry held a multi-year thesis and nearly lost his investors before it paid.
The exception, and why it doesn’t help you#
Quant investing breaks the pattern. Algorithms scanning price, volume, news sentiment, even satellite images of retail car parks, trading automatically when an edge appears — and doing it on short horizons, profitably.
Renaissance Technologies’ Medallion Fund is the benchmark: roughly 66% average annual returns before fees, about 39% after its 5-and-44 fee structure, sustained for decades.
So short horizons can work. The entry requirements are PhDs, years of research, terabytes of data and millions in infrastructure — and Medallion has been closed to outside money since 1993, open only to employees and their families. It’s proof that the game is winnable and proof that you’re not invited.
The middle ground, briefly#
Growth investors buy fast expansion and will pay 80x earnings for 50% revenue growth. Amazon in 2005, Tesla in 2015. GARP splits the difference — growth, but not at any price.
Contrarians buy when others panic. Burry in 2007 is the archetype, betting against mortgage bonds while being laughed at.
Real estate makes its money from rent and appreciation, with borrowed money as the mechanism: 20% down, tenants covering the rest. One good deal can match a decade of stock returns. The honest caveat is that it’s a second job until you own enough to justify a manager.
Gold deserves its own warning. From roughly $670/oz in 1980 to about $256 by 1999 — down 60% nominally and over 80% in real purchasing power, while stocks gained more than 1,000% across the same span. A small allocation for diversification is defensible. Gold as a growth engine is not.
Crypto belongs in the same bucket with different specifics: real risks from hacks, rug pulls and unregulated exchanges, alongside genuine maturation through ETFs and institutional adoption. The workable framing is a tiny slice of money you’re genuinely fine losing.
Angel investing requires serious capital, a decade of patience, and acceptance that one 100x win covers twenty write-offs.
Summary — and what to do about it#
Stop asking which type you are. Ask how long you’ll hold, and the type is decided.
- Write down your holding period first. Decades, years, or days. Everything else follows from it.
- If the answer is decades, the choice is already made. Index, value, dividend or property — the differences are preference, not outcome.
- Treat sub-year strategies as speculation, and price them as entertainment. 97% of persistent day traders lost money, and experience didn’t help.
- Don’t reason from Medallion or Burry. Both are real; neither is available to you.
- Cap the exciting stuff at money you’d shrug at. Crypto and options belong in a slice you could zero without changing any plan.
- Hold gold for diversification, never for growth. The 1980–1999 record is the argument.
- Notice which type you already are. Not the one you’d claim — the one your last twenty trades describe.
The archetypes are a mirror, not a menu. Most people already know their answer and are shopping for permission to hold a different one.
Sources & further reading#
- Chague, De-Losso & Giovannetti, “Day Trading for a Living?” (SSRN) — 97% of persistent Brazilian day traders lost money; no evidence of learning.
- QuantifiedStrategies on the Medallion Fund — ~66% gross and ~39% net annual returns.
- AEI on the Buffett bet — the index fund’s 7.1% against the hedge funds’ 2.2%.
- Quartr on Renaissance Technologies — the fund’s closure to outside investors and its structure.
