Five-Step Process - AI Analysis Prompt
Use this Ray Dalio rule prompt to apply “Five-Step Process” to a specific company. It turns a vague opinion into a repeatable checklist: what facts you must verify, which assumptions matter most, what would invalidate the thesis, and the common misreads that create false certainty. Expect a written output you can save: a thesis summary, key risks, and next-step questions for filings and earnings calls. If a claim matters, require primary-source citations before you act. Educational only — not investment advice.
Full Prompt
You are an investment analyst trained in Ray Dalio's principle of "Five-Step Process." Your core philosophy: principles-based thinking, radical transparency, all-weather strategy. Your task is to analyze {Company Name} through the specific lens of this principle.
## Context
Ray Dalio teaches: "Use the 5-Step Process to get what you want: 1) Set clear goals, 2) Identify problems, 3) Diagnose root causes, 4) Design solutions, 5) Execute."
## Analysis Framework
### 1. Principle Application Assessment
- How does this principle specifically apply to {Company Name}?
- What aspects of the company are most relevant to "Five-Step Process"?
- Rate the company's alignment with this principle: Strong / Moderate / Weak
- What would Ray Dalio focus on first when evaluating this company?
### 2. Quantitative Evidence
- Identify 3-5 key financial metrics most relevant to this principle
- Analyze these metrics over the past 5-10 years for {Company Name}
- Compare with industry peers and historical benchmarks
- Are the numbers improving, stable, or deteriorating?
- What story do the numbers tell through the lens of "Five-Step Process"?
### 3. Qualitative Deep Dive
- Evaluate the non-quantifiable factors Ray Dalio would examine
- Management quality and alignment with this principle
- Industry dynamics and competitive position
- Business model sustainability viewed through this specific lens
- What would Ray Dalio want to know that isn't in the financial statements?
### 4. Risk Assessment Through This Lens
- What risks does this principle specifically highlight for {Company Name}?
- What could go wrong that this principle is designed to protect against?
- Are there warning signs that Ray Dalio would flag?
- Stress-test: How would this company perform under adverse conditions?
- What is the worst-case scenario from this principle's perspective?
### 5. Opportunity Identification
- What opportunities does analyzing through this lens reveal?
- Are there hidden strengths the market may be undervaluing?
- How does this company compare to Ray Dalio's ideal investment?
- What catalysts could unlock value related to this principle?
### 6. Dalio Verdict
- Summarize: Does {Company Name} pass the "Five-Step Process" test?
- Rate the investment opportunity: 1-10 from this principle's perspective
- Clear recommendation: Buy / Hold / Avoid (based on this principle alone)
- What conditions would change your assessment?
- One-paragraph summary capturing Ray Dalio's likely assessment
## Output Format
Present your analysis with specific data points in each section. Use Ray Dalio's analytical style: systematic macro analysis with principles-based decision framework. End with a decisive verdict.Related reading (close the loop)
Pick one path below to turn the output into a checkable, repeatable decision policy.
- Read the matching principleDefinition, boundaries, pitfalls, and a minimal checklist.
- Master profileMethodology summary + common misreads for this framework.
- Practice in scenariosTranslate conclusions into “what I do under stress”.
- More prompts from this masterTriangulate with multiple rules instead of anchoring on one prompt.
Educational only. Verify facts with primary sources and apply your own constraints.
Basic Questions
How does Dalio's five-step process systematically improve investment decisions?
Dalio summarizes problem-solving (including investing) as a five-step loop:
📋 Five steps:
1. 🎯 Set clear goals: What's your investment target? Annual return? Risk level?
2. 🔍 Identify problems: Where's the gap between goals and reality?
3. 🩺 Diagnose root causes: Why does this gap exist? Insufficient knowledge or discipline?
4. 📐 Design solutions: Create specific improvement plans
5. ⚡ Execute completely: Follow the plan strictly, undistracted by emotions
💡 Key: This is a loop — after completing one round, start over for continuous improvement.
📋 Five steps:
1. 🎯 Set clear goals: What's your investment target? Annual return? Risk level?
2. 🔍 Identify problems: Where's the gap between goals and reality?
3. 🩺 Diagnose root causes: Why does this gap exist? Insufficient knowledge or discipline?
4. 📐 Design solutions: Create specific improvement plans
5. ⚡ Execute completely: Follow the plan strictly, undistracted by emotions
💡 Key: This is a loop — after completing one round, start over for continuous improvement.
Usage Tips
Is the AI's 1-10 rating reliable?
⚠️ The five-step process score measures "the systematicness of your investment decision process," not whether results are good or bad.
The rating's unique value:
- Helps you identify the weakest link in your investment process — most people make the most errors at the "diagnose root causes" step
- A high process score doesn't guarantee short-term profits, but ensures continuous improvement in long-term decision quality
- Track the same investment's process score over time to verify whether you're improving
Core reminders:
- Dalio's five-step process is a cyclical system, not a one-time checklist
- AI can help diagnose process flaws, but execution discipline must be maintained by you
- The most common mistake is skipping "diagnosis" and jumping to "design solutions" — this treats symptoms without addressing root causes
The rating's unique value:
- Helps you identify the weakest link in your investment process — most people make the most errors at the "diagnose root causes" step
- A high process score doesn't guarantee short-term profits, but ensures continuous improvement in long-term decision quality
- Track the same investment's process score over time to verify whether you're improving
Core reminders:
- Dalio's five-step process is a cyclical system, not a one-time checklist
- AI can help diagnose process flaws, but execution discipline must be maintained by you
- The most common mistake is skipping "diagnosis" and jumping to "design solutions" — this treats symptoms without addressing root causes
Getting started
Does this prompt give investment advice or buy/sell calls?
No. It is a research helper that turns your thinking into checkable inputs and constraints: what evidence you must verify, what would prove the thesis wrong, and what common misreads to avoid. Treat the output as a draft, not a signal. Validate every material number against primary sources (filings, earnings releases, investor presentations, transcripts), and do not act unless you can write down (1) position-size limits and (2) explicit invalidation triggers.
What inputs should I provide for a reliable result?
At minimum: a 1-sentence business model summary, your current thesis (why it wins/loses), time horizon, and risk constraints; a valuation/price range; and the latest financial statements (profit quality, cash flow, debt/liquidity). Add context that reduces hallucinations: the exact filing period, known one-offs, key competitors, and what you do NOT know yet. If an input is missing, label it as missing evidence instead of letting the model guess.
Validation and boundaries
How do I validate the output?
Validate falsifiable claims one by one. Rewrite each key statement into something you can check: the metric, the period, and the source. Numbers must match filings; management claims must be traceable to transcripts/guidance; and “moat” claims need observable evidence (pricing power, retention, switching costs, cost structure). Anything you cannot verify becomes a follow-up task, not a decision trigger. If the model cites dates, confirm they are not beyond its knowledge cutoff.
When should I NOT act on the output?
If you cannot write down invalidation triggers, a position-size cap, or primary-source evidence for the key claims behind “Five-Step Process”, do not act. The safer move is usually to reduce size, slow down, and schedule the next review.
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