Twenty years later...

Distilling my favourite learnings from two decades in financial markets

I recently spent a few days flitting around the Scottish Highlands. Amongst the breath-taking scenery of glen, cows and deer, we snuck in whiskey tasting where I learnt an enormous amount about my taste pallet in a relatively short period of time. While the rules of peat, grain and floral content do not always apply perfectly to each region, I do now feel capable of making an educated guess on what whiskeys would work best for me.

In essence, after years of consuming random whiskeys hoping I would land on one I liked, I now have guidelines to help me the next time I have to select a drink.

This equally enjoyable and educational experience triggered my thoughts on what lessons I have learnt over the last twenty years of investing in financial markets.

Putnam Investments, Boston, 2008

My time in Boston was all bull markets from when I began in 2004 until the financial crisis hit. Overnight, Lehman and Merrill fell and it felt like the floor went out from under the markets. I was four years into the job and too junior to be important but thankfully, impressionable enough to learn several tremendous lessons that have stuck with me ever since.

Logic does not rule the market, fear often does.

Perhaps this changes with the rise of artificial intelligence trading but fear presents the biggest rebuttal to the efficient market hypothesis. Be it fear of missing out (herd mentality), loss aversion (benchmark hugging) or fear admitting mistakes (holding on to falling knives), many of us fall victim to bending to fear instead of disciplined adherence to logical process. The good news is that this creates opportunity for growth and change for us individually, to exploit market mispricing driven by some of these behavioural mis-steps.

In a storm of volatility, follow the process. Just follow the process.

Do the numbers, build the models and design your investment process in calm. When market noise is the loudest, follow the numbers, not your 'gut' (see lesson above). The process can be re-evaluated after the period of volatility but do not throw the baby out of the bathwater in the middle of a storm.

Merrill Lynch, Hong Kong, 2009

Interning on a high yield prop trading desk in the peak of a liquidity crisis was remarkably educational. I remember pricing in 15 cents to the dollar bonds for blue chip securities which reverted to fair market pricing within months. I learnt that most investors claim to be contrarian, which while impossible mathematically, thankfully means that there is plenty of opportunity if you do venture against the stream.

Seek out investors that want to talk about mistakes and ones that disagree with your views.

Many of us enjoy recounting wins but I have learnt that the best lessons are gained from hearing about mistakes made. The conundrum we face is that acknowledging that we are usually not contrarian and that we are frequently wrong is against the grain of being seen as confident investors. However, it is precisely this learning that will help us avoid repeating the same mistakes so pay attention to people who are forthcoming with their losses as well as their wins.

These are investors who have harvested their hard lessons learnt and are not hiding from them.

Pictet Asset Management, London, 2019

Remember that week in March 2020 we were all sent out of the City of London to go work home and we all assumed we would see each other the following Monday back in the office?

The unexpected will happen so keep evolving and avoid complacency.

Whether we want it to happen or not, change is inevitable. Our only way forward is to embrace it by staying flexible and not sticking our heads in the sand. Digesting new information and changing dynamics is key for growth and success be it in investing or in personal life. So take up new hobbies and throw yourself into new learnings as much as you can. Become a coder, a golfer, a dancer.. or all three. Afterall, we may never know when a small gaming graphics start up will become the most valuable company in the world, but it helps to learn from those that built it.

"Embrace the unknown and embrace change. That's where true breakthroughs happen." Jensen Huang

Me, Today, 2024

So here I am twenty years later, still seeking out new lessons to learn and hopefully getting better harvesting ones I have experienced in the past.

While, my learnings will continue, the biggest sentiment I feel today is one of being thankful.

Be grateful for our teachers, no one is an island.

I am immensely humbled to still carry joy and hunger for the career I started with as a graduate analyst to today as an investor and advisor. Most importantly, I am eternally grateful to all the talented investors, mentors and supporters I have had all these years. Without their help, safe harbour and confidence, these lessons would have been impossible to experience and I strive to pay these kindnesses forward through my own interactions to help enable success in others any way I can.

So, Slàinte Mhath, here is to raising a glass of sherried cask Speyside to the two decades of joy and fulfilment that have been and to what awaits me in the ones to come.