There are a couple lessons here. The first one is risk management, and the second is the setting yourself up to adapt quickly and pivot.
US hedge funds Melvin Capital and Light Street suffer further losses via @FT
on.ft.com/3iuvVsb
US hedge funds Melvin Capital and Light Street suffer further losses via @FT
on.ft.com/3iuvVsb
When a position goes against you, especially one with the potential of unlimited loss, you need to quickly identify the driver of the adverse movement, and strategize your exit or next step. My bias is that if you can't control the risk, better to exit than torture yourself.
Adapt- you don't want to bind yourself to a certain style of investing or trading. As the world and the financial markets continue to evolve, you need to as well. The ability to quickly adapt and ride the new tide is key to long-term success.
More on adaptability- sometimes it is about increasing knowledge and rejecting old ones that aren't robust or true. Sometimes it is about doing the most difficult things of ripping your processes apart and rebuilding them. You can avoid the second if you have a simple philosophy.
A simple philosophy that is based on a foundational set of truths, with which you can develop a robust process to build and expand new strategies on top of them. Your strategies are not your philosophy and process, they decay or go in cycles.
The survival of the fittest is the truth, but it is hard for most to grasp this concept as we like to fantasize about getting rich with certain styles of investing, be it value, growth, ESG, etc., as widely popularized in this industry.
Focus on managing risks and surviving in the business, ideas will come and so as returns.
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