Is it me or do you run into a lot of ppl that try to get on the buyside but don’t personally invest their money?
I am not sure if you actually need “personal” experience with investing, but if you haven’t spent the time investing your own/other people’s money, how good of an investor can you really be and why would someone hire you to be a research analyst?
I don’t invest my money in individual stocks now, but that’s because our board of directors have rules in place for our funds that severely restrict what managers and analysts can buy - I think we’re limited to stocks from the S&P 500, and need pre-clearance for all trades. There’s probably also limits on using margin or leveraged products, too, though I haven’t checked because I generally don’t use them.
When I was in prior positions, Frank, I did invest my money. Only stopped because it’s part and parcel of current employment gig.
Perhaps it’s because some people don’t have any money to invest?
Yep, know people who have worked at some of the famous buyside firms, (places like Carlyle/GS etc) and many of them admit to not knowing much about picking individual stocks. Even the ones that do analyze individual securities seem to get nervous when it comes to their money.
Paralysis by analysis.
Cities teem with evil and decay, let’s give it a good shake and see what falls out!!
Well, if you don’t have much money to invest to begin with, you’re faced with a dilemma: show that you don’t have experience investing your own money, or show that you are terrible at managing risk because any reasonable trade would blow out your ability to take risk.
If you just do analysis or asset gathering or compliance, I don’t see the absolute need to have investing experience. However, if you are going to be pulling the trigger (as opposed to executing other peoples’ trades) it’s important to either have done it, or worked very closely with someone who has instructed you well.
You want a quote? Haven’t I written enough already???
I think it’s a challenge for a few reasons:
1) if you mess up, you look bad – obviously, this can go both ways, but some people are risk averse
2) you probably won’t have time to diversify properly – how are you going to work 60 to 80 hours a week and manage a 30 stock portfolio as well? it can be done, but it’s usually pretty time consuming.
3) there may be restrictions around what you can participate in.
4) in a sense it presents a conflict because you may be reluctant to change your recommendation if you are personally invested, knowing that your fund might move out of the stock in some volume (you are usually not allowed to trade ahead of the fund).
5) most people don’t know what they’re doing anyway and probably only admit that deep down.
“I lost my wife to a margin call. Wives get mad when you come home and say, ‘Sweetheart, I lost the house today.’” - Dennis Gartman on trading mistakes
You talking people who want to get into the industry or those in the industry?
It’s different running a billion dollar portfolio and a 50k portfolio.
yuoska Wrote:
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> It’s different running a billion dollar portfolio
> and a 50k portfolio.
Exactly.
If you’re on the buyside, perhaps you should actively manage your own funds on principle.
But from an actual financial perspective, it’s unlikely to be worthwhile.
Say your goal is to beat the S&P by 1% per year. If you have (as yuoska suggested above) a $50k portfolio, then you could potentially earnyourself an extra $500 per year.
How many hours of your time are you willing to spend doing original research in order to make an extra $500? Probably not enough hours to actually meet your beat-the-index-by-1% goal.
Of course, most folks working in finance will have several times more than 50k to invest. But still, the incremental payoff that they will recieve by actively managing even a few million dollars is unlikely to be worth the effort.
bromion Wrote:
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> I think it’s a challenge for a few reasons:
>
> 5) most people don’t know what they’re doing
> anyway and probably only admit that deep down.
This.
aut viam inveniam aut faciam
If you look in the disclaimer of SA articles, there are indeed few people who invests following their analysis…I always found it strange to read an article in which the writer is clearly convinced of the potential of some stocks but does not own it himself…
Anyone looking to get into the industry should be managing their own portfolio (even if it’s only 1k). I was specifically asked this in every interview I ever had (I’m specifically talking about junior level investment analysis positions). Once you’re actually in the industry, it’s a different story due to time constraints, conflicts of interest, etc. I usually just put a chunk of my money in the fund I have the most direct impact on at work, that way I am sort of managing my own money in a way, or at least have a beneficial interest in making good investment decisions at work.
Yeah, I might change my view on it. You can’t do active management with 1k or 2k without being kind of irresponsible about risk management, but you can practice asset allocation and rebalancing, which are key practices. And it helps to look at your allocations as you try to develop views.
You want a quote? Haven’t I written enough already???
Studying With
Most people I know don’t because:
1) They already invest in the funds the manage or for which they supply analysis.
2) Investing in stocks in addition to the above investments and their 401k would overly correlate their financial capital with their human capital.
3) Compliance is a bitch.
“Some people make shoes. Some people make houses. We make money and people are willing pay us a lot to make money for them.”
I’m actually referring to ppl not in the industry. If you’re already in the industry, you should problably eat your own cooking.
But I come upon many ppl that are attempting to go on the buyside because they want to manage money. When I ask, “so what are your views on the market and what have you been investing in?”, they normally say, “i’m not invested at the moment”. Then I am thinking, how can you be serious about investing if you don’t even invest yourself?
Ppl who are passionate about investing are going to do it no matter what. We don’t require a title or a job to do this. Yes it does take time, but you don’t need 80 hours per week. You spend 80 hours because that is the best use of your time.
30 stocks? why do you need to own 30 stocks? I own about 8 and that is plenty in my view. I would own less if i was better.
Having experience trading your personal account is not a prerequisite to getting hired to a buyside job. You need relevant _work_ experience from a prior job and a solid education background. Or you can be Michael Burry and publish your investment ideas for all to see. If you’re good, you will eventually get noticed.
You could do 8 as well depending on your investment style. Having followed the market for some time, I feel that there is a lot of insider trading and random elements that influence short-term pricing, so I tend to prefer making a lot of smaller bets on a long-term basis than a few large bets. But that fits with my investment style of rapidly looking at several hundred companies a year focusing on 2-3 year time frames (the market is really only good at discounting about 6-12 months out), trying to find very specific patterns. At any rate, 8 could still be time consuming if you are not allowed to invest in companies you are following on behalf of the firm – to source 8 good bets on the weekends, and then follow those stocks continuously could be a real time sink.
“I lost my wife to a margin call. Wives get mad when you come home and say, ‘Sweetheart, I lost the house today.’” - Dennis Gartman on trading mistakes
there is definitely no right or wrong so long as you’re making money.
I just can’t find 30 great ideas. 3 a year is a max problably for me, but in these conditions, it gets much easier.
What are your thoughts about putting personal account performance on your resume?
I had a section in college for “Leadership Experience” where I was an analyst for my university’s endowment fund in the Basic Materials industry, but that information is getting outdated and I’ve been actively managing my own portfolio for the past year (only $10,000 now but up 35% this year).
Some people say it’s hokey to put that on your resume but it seems like it would be applicable for these types of positions?
Just make sure you have an attribution report that is GIPS compliant. ;-)
You want a quote? Haven’t I written enough already???
I wouldn’t put it on my resume.
If you get the interview, you will have ample time to discuss these matters.
I just don’t get how ppl can talk intelligently about stocks without owning them.
FrankArabia Wrote:
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> I wouldn’t put it on my resume.
>
> If you get the interview, you will have ample time
> to discuss these matters.
>
> I just don’t get how ppl can talk intelligently
> about stocks without owning them.
a lot of money managers are good and dont’ need to trade their own money.
trading your own money creates an emotional bias as well
I disagree. Personally I think it’s better to not invest unless you really know what you’re talking about. I don’t believe trading and following a portfolio really makes you more knowledgeable or better at it, rather I feel it’s the other way around, you should be extremely knowledgeable before you invest even a dollar of your money.
Cities teem with evil and decay, let’s give it a good shake and see what falls out!!
Palantir Wrote:
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> I disagree. Personally I think it’s better to not
> invest unless you really know what you’re talking
> about. I don’t believe trading and following a
> portfolio really makes you more knowledgeable or
> better at it, rather I feel it’s the other way
> around, you should be extremely knowledgeable
> before you invest even a dollar of your money.
we’re on the same page. definitely do your due diligence. But at this point, we on here are all amateurs, but to get better, you must practice. you don’t get into the ring until you learn the basics, but you have to spar.
its been said that you don’t truly know the company until you invests in it. I can certainly say that with the companies I have invested in, I learned a lot about them AFTER my purchase.
So most of you guys/gals don’t have personal brokerage accounts? I do and invest 20% of my after-tax income. I thought that would have been the norm around here I guess not?
I enjoy researching companies and doing my own due dilligence. I don’t see how this could be seen as a negative on my resume?
If you read on someone’s resume “generated x% on personal account”, it tends to come off too hard like you’re trying to show off. idk, that is just me.
in an interview, problably within 10 mins, you should be able to sense whether someone invests money seriously or just acts like it.
While I’m not against the idea of investing before entering the industry, there are few points I like to clarify between running a PA and running an institutional portfolio.
1. Investment is fun when you’re running your money and it is stressful when you are running other people’s money. I slept nicely through GFC but I couldn’t sleep too well in the last year because I’m afraid waking and losing $30mil overnight…
2. When running an institutional portfolio - idea is important, risk management is essential but OPERATION is critical. Which broker to use, what price can you get… a saving of 1bps is probably $1m on P&L. Risk management may come first for some PM (especially long only managers), that is the way to explain your under-performance to clients.
3. Process, process and process… There are 100+ equity funds in town (where I live) if not more. I can only think of a handful of good stock-pickers but many good investment professionals. Most of them are good at crafting investment process - a source of REPEATABLE risk-adjusted return.
My 2c.
johnnyBuz Wrote:
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> So most of you guys/gals don’t have personal
> brokerage accounts? I do and invest 20% of my
> after-tax income. I thought that would have been
> the norm around here I guess not?
I think that the average person-on-the-street fancies that they have a wealth of knowledge and can easily outperform Wall Street equity analysts.
I suspect that this sentiment is actually much less common among CFA charterholders.
All of my money is with Vanguard.
Buying high beta in a bull market (like tech, or housing stuff) makes people think they’re brilliant, because they see the market go up 10% and they’re up 20% and don’t realize that their outperformance is simply because they have a beta of 2.
There was some research and survey work done about portfolio managers with MBAs with concentrations in finance and no CFA charter versus people with CFA charters (I don’t know if they separated out people with both, but they should have). If I remember right, they found was that average performance (risk-adjusted, I believe) was similar, but that the CFA folks ran substantially more conservative portfolios. It would be important to look at this over the entire cycle, though.
You want a quote? Haven’t I written enough already???
Studying With
yuoska Wrote:
——————————————————-
> While I’m not against the idea of investing before
> entering the industry, there are few points I like
> to clarify between running a PA and running an
> institutional portfolio.
>
> 1. Investment is fun when you’re running your
> money and it is stressful when you are running
> other people’s money. I slept nicely through GFC
> but I couldn’t sleep too well in the last year
> because I’m afraid waking and losing $30mil
> overnight…
>
> 2. When running an institutional portfolio - idea
> is important, risk management is essential but
> OPERATION is critical. Which broker to use, what
> price can you get… a saving of 1bps is probably
> $1m on P&L. Risk management may come first for
> some PM (especially long only managers), that is
> the way to explain your under-performance to
> clients.
>
> 3. Process, process and process… There are 100+
> equity funds in town (where I live) if not more. I
> can only think of a handful of good stock-pickers
> but many good investment professionals. Most of
> them are good at crafting investment process - a
> source of REPEATABLE risk-adjusted return.
>
> My 2c.
This.
does it seem at all odd that with all this “process” and “operations” that the vast majority of PMs underperform the market?
My guess is they focus on all these things instead of understanding businesses. worrying about Alpha, Beta, and quarterly performance is problably more of a drag than anything.
To Wendy, most WS/BS equity analyst have a wealth of knowledge about their companies. But with regards to their opinion on where the stock is going to go, and even where the company is going to go, ignoring their opinion is the safest strategy. Most have a huge bias that is against the interest of a serious investor. They’re a source of information, not a substitute for thought in most cases.
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