How do you deal with the fear/stress of losing money?

Even though you did your research and have high convictions, either some tail event or perceived fear keeps you up at night. How do you guys deal with this?

Please assume you only have a small universe and there is NO diversification at all. 

Comments (6)

Most Helpful
Sep 20, 2022 - 9:55am
NuclearTrader, what's your opinion? Comment below:

Three things that help:

1) Not having a neurotic personality
2) Caring about things outside of work (extra benefit of making you a better person in general)
3) Not caring too much about prestige or group pressure (we're all social apes of course so we all care but there are gradations)

And then finally, the thing that really got me comfortable losing money was building a positive track record...
Btw, the risk of a tail event is part of the trade, no? So no reason to stress about that. If it's a good trade, it's a good trade. This circles back to the not caring about group pressure. Sometimes your job is to lose money. 

  • PM in HF - Other
Sep 20, 2022 - 10:12am

It's part of the game. 

Usually this nerve racking uncertainty that induces anxiety happen when you're early on your track, so you're uncertain about the longevity of your own strat, and it will suck for a while, which is fine.

It will force you to refine your process continually. Early stage of buyside public investing tends to be walking on eggshell.

That's why it's not for everyone. 

Once past that, it will be like any other day job. 

Sep 20, 2022 - 10:17am
Inflection Point, what's your opinion? Comment below:

I try to remind myself the following:

Is the expected value overwhelmingly positive? Then stick to your guns. Trust the process and understand that variance will always be a part of the game. Over the long term, results will be increasingly driven by skill rather than luck. But don't make bets that could ruin you when you get unlucky.

  • Associate 2 in PE - LBOs
Sep 20, 2022 - 10:39am

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