Since our jobs are constantly thinking about markets and this cycle can cause burnout (maybe even mental health issues for some), how do you avoid thinking about markets 24/7 and/or avoid burnout?
Aka how not to let this job take over your life?
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No recommendations on how to relax, but a few notes on how to make the job less stressful from my experience. Recommendations are from a fundamental L/S view, in no specific order. Please add to the list as one sees fit, regardless of strategy. I reckon there will be similarities across all styles.
1. Have deeper research, higher-conviction names at higher weightings.
2. Trade less. Have fewer positions. Work to increase the quality of ideas, not quantity and speed.
3. Turn off all market noise, especially the news. They are there to entice a reaction. Maybe it's different for sales & trading, but in fundamental shops, mainstream financial news adds little value.
4. Spend more time on research and process refinement. All trading styles will require process refinement and some form of research.
5. Focus on the process, not the result.
6. Don't bite off more than you can chew. One name/one idea at a time. Focus.
7. This is a marathon, not a sprint. Having a get-rich-fast mindset will lead to unquantifiable risks.
8. Investing in companies is easier than estimating short-term price movements.
I work at a place that violates pretty much single rules you listed. But I agree with you.
at most market neutral l/s funds with a heavy trading lean, it's impossible to do most of what you're describing here. shops that let you do this sort of stuff are overwhelmingly good seats as an employee, but are structurally losing share to the former type of shop, so these seats are hard to come by/you have to worry about AUM outflow risk instead as you get higher up.
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Couldn't have said this better......
Agree. The answer to this question should be something like meditation ,cardio, etc. Not "change your investment process".
What does refining a process look like to you? Can you give some tangible examples of what refinement looks like, and what are the catalysts that lead you to make a refinement of your process, and how you know you are correctly refining / refining in the right direction? Thanks in advance.
Agree that my answer wasn't the normally expected, explicit answer, but I think it is equally relevant. It's important to develop a healthy attitude towards markets and self-expectations. Framing becomes vital here because the expectations of the self (lots of high/overachievers in this industry) greatly surpass the reality that triggers the eventual burnout.
Framing is crucial. Process improvement vs. making/losing money, is different yet the same. It depends on how we as investors want to perceive it and to develop the right mindset towards it.
The trick is to not think about the money. It is not money, it is risk/capital. On the next level is to think of the process. Money/capital/risk can not be refined or improved and is static in nature. The point isn't to maintain a 50% hit-rate but to continuously improve on it. This notion applies to all investment/trading styles. Increasing the denominator (faster idea velocity, faster modeling, faster everything) is a trap that just compounds the stress if your hit rate doesn't improve. The process dictates the hit-rate.
This applies specifically to a shop/pods running a short-term trading setup that will have a process that is specific to the team/PM.
Many may think the stress in the industry comes from losing "money". I think that is only the result. I reckon the real stress is from uncontrolled variables of a trade/investment that have not been fundamentally assessed within the investment process, which ultimately has a higher probability of resulting in the transient or permanent loss of capital. This is the part that my previous post was focusing on, aka, increasing the hit-rate.
Difficult to give exact, granular examples, but a simple one could be accounting for proper changes in competitive landscape. This isn't as straightforward and requires a bit of work involved to predict/track with granularity and edge. We want to optimize these processes to track and predict these changes.
The most straightforward method is to review your recommendations drivers and assumptions on a scheduled basis. Probably best once the position is closed or a pre-defined thesis is reached or broken. The knee-jerk reaction would be to put it aside and move on to the next idea. Don't do that. Not all funds will have a formal review process, most likely due to time restraints, so this will have to be done by yourself.
You'll know you are refining in the correct method because the refining is embedded in a reviewing process. Matching your wrong view vs. what was the correct view. Difficult to refine in the wrong direction under such circumstances.
Ask: Where were my assumptions wrong and why? What had to be done to reach the correct view?
Repeat and rinse. It's tough, but don't take it personally. Mistakes are great learning opportunities.
Making the same mistake repeatedly will have the fund/LPs question your investment process. Then the real stress begins.
It would need to be an adjustment outside of your job. Something like ramping up 10-15 min per day of incremental exercise, some weekly time dedicated to hobby, simply getting out of the office/house, may drive somewhere to get fresh air, look at yourself in the mirror and just think damn, I’m awesome.
not at a HF so maybe this is tone deaf but you have got to have other passions/pursuits that you care about. running is a good one, but if you hate running, walking does it to. there's also something psychological in there, where our lizard brains when outside and we scan and don't see danger, we naturally get calmer. I've noticed this running and in long walks.
also, if you have a life outside of your work and you prioritize that over work, logically speaking work cannot take over your life
Anyone who has never put on risk can’t relate to the MTM stress we face on the daily. It’s just completely different thinking about it and then actually doing it. As dumb as it sounds - as you get better, as you make more money, as you build conviction in your investment process, as you get more experienced - things become alot easier. You become a lot more numb (not necessarily in a bad way) to the daily volatility. I remember being so stressed out and thinking how much I didn’t suit the role initially. But give it some time and you’ll be ok.
At my shop we trade with a short-term bias. Can add some thoughts:
Squash, boxing, spin class anything that really makes you sweat. Outside of that after a while you come to a position where you aint afraid of being fired but either way the grind of MTM just makes you annoyed. Then again there is a reason certain personalities are attracted to this insanity.
It might sound counter-intuitive, but the answer for me has been to go on more vacation and spend less time in the office (pre-covid).
I have also found that taking shorter, more frequent time off is better for me mentally. I found that even if I don't do anything big on my days off, it is still restorative to just not be in the office watching the market and, more importantly, around people who are stressed out or looking to take out their stress on you (bad boss).
Video games always help. Whether it's playing an RPG that puts you in an entirely different world, wrecking stoned frat boys in an FPS, heck playing something like SimCity/Cities Skylines where you get to build a system of systems into a metropolis. Basically, they all have something in common that is also a big part of the inner psyche we WSO monkeys all tend to have: accomplishing something, rising to the next level/rank and having something to show for it, literally winning the game.
Otherwise the exercise tips are good. Healthy outlets for stresses and working out coincidentally just makes you overall more healthy in the process. Get on that treadmill or elliptical, put the earbuds in for your favorite podcast or music mix and just close your eyes and let your body do it's thing.
Another fun one is to do a different kind of daydreaming: go through the entire process of "Where do I want to go on vacation? How much are flights? What hotel? What's the fun stuff to do while I'm there?" If you're getting paid to do accounting and modelling for others, why not indulge in doing some for yourself? Just don't actually click buy (unless you really want to and have the time to take the trip of course). Same daydream for cars, properties, boats. What would you want to be doing when you hit your F-U money and get to walk and...just do all that? A meditation on what your end goals are and how you'd enjoy them.
Or worst case, pick up a nasty after hours drinking habit that makes you go zero to "what did I do last night? I have no memory of anything" the next morning so you'll definitely zone out of market stressors. Ok, don't actually do that one.
I'll add some esoteric activities I to do to switch off:
- Ice bath and Sauna. 15m sauna w/ 1-3 minutes in the ice bath repeated 2-3x is awesome to relax and switch off.
- Massage. Even better if you can schedule in your massage before you hit the sauna and ice bath.
- Really focus in on getting the best sleep you can. If you're sleeping like shit you're more than likely going to be more stressed at work. Andrew Hubermans pod on sleep is a great start.
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