Systematic vs Discretionary choice
Hey, I’m currently at a point where I need to make a choice on what to specialize in but I was wondering a few things about different investment styles : First question might come off as odd, but is systematic investing fun ? It seems to me that it would be more profitable but you’re not really taking positions on what your views are so it would seem less interesting work than discretionary, but safer at the same time. About safety : if my previous point stands, is working at a systematic fund safer than at a discretionary ? Finally, what asset classes are more geared towards systematic and which ones towards discretionary? I would think that exotic derivatives would be harder to trade systematically since they’re OTC but are some vanilla asset classes actually more suited for discretionary ? Thank you all
Based on the most helpful WSO content, here's a breakdown of your questions:
Is systematic investing fun?
Is working at a systematic fund safer than at a discretionary fund?
Which asset classes are more geared towards systematic vs. discretionary investing?
Ultimately, the choice between systematic and discretionary investing comes down to your skill set and what excites you. If you're analytical and enjoy working with data and technology, systematic might be a better fit. If you prefer storytelling, market narratives, and direct decision-making, discretionary could be more appealing.
Sources: Long term, concentrated, deep fundamental investing, https://www.wallstreetoasis.com/forum/asset-management/endowments-foundations-part-2-asset-allocation?customgpt=1, https://www.wallstreetoasis.com/forums/the-only-post-about-active-investing-you-will-ever-need-to-read?customgpt=1, Most academic style of investing that requires the most thought?, Q&A Discretionary Hedge Fund Trader
"It seems to me systematic would be more profitable than discretionary".
Care to substantiate that claim?
I would tend to believe that systematic trading leaves less room for human errors, and arbitrage techniques should not really lack in profitability given their very definition. I know that arbitrage is not really viable with the increase in algo trading but my understanding of systematic trading was that you’re playing much safer bet than the discretionary ones. Please correct me if I’m mistaken
I didn't understand what you said about arb, but the short of it is I've never seen data or studies arguing for either side, just like I've never seen data suggesting equities is more profitable than fixed income (or the reverse). It's also the first time I hear anyone make the claim.
My advice would be to avoid broad assumptions like that and focus on pursuing what you're good at and what you enjoy doing. Surely your chances of being profitable will be highest doing something that fits your interests. I can understand someone having doubts between fundamental equities and fundamental credit. But when you look at the people in the quant field vs the people in discretionary, it's clear they each attract a very different set of profiles.
That makes sense, thanks a lot for the insights !
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