SI60: The dangers of "Home" bias and the benefits of Diversification

Top Traders Unplugged

Niels Kaastrup-Larsen

Business, Business News, Investing, News

4.8 • 670 Ratings

🗓️ 3 November 2019

⏱️ 69 minutes

🔗️ Recording | iTunes | RSS

🧾️ Download transcript

Summary

This week, we cover some of the dangers of ‘Home Bias’, and the benefits of diversification mixed with good risk management. We also discuss the differences between common Trend Trading and Systematic Trend Following, why investors tend to hold on to losing positions longer than winning positions, why people being hopeful with losses and afraid with profits may be the reason for why Trend Following works, DUNN’s Capital’s recent milestone of 45 years in the business, why Trend Following strategies are more than just the ‘perfect hedge’, ways that Trend Following can be applied to life, and we touch Abbey Capital’s recent article regarding Trend Following performance over the current decade, compared to previous decades. Questions answered this week include: Should long and short entries be symmetrical? Should you limit position sizing in particular markets? What do you define as a small loss?

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Episode TimeStamps:

00:00 – Intro

01:05 – Macro recap from Niels

02:20- Weekly review of performance

09:00 – Top tweets

35:05 – Questions 1/2: David; Should a bearish strategy mirror a bullish strategy (i.e. 100 day hi/lo entry for both)? Should you expect bearish strategies to do as well as bullish strategies?

39:45 – Question 3: Walter; Do you have position size limits on individual contracts?

44:15 – Question 4: Neil; What is the definition of a “small loss”?

49:50 – Benchmark performance update

50:55 – Discussion of

Transcript

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0:00.0	You're about to join Jerry Parker, Maritz Siebert, and Nealz Kostrup Larson on their raw and
0:06.9	honest journey into the world of systematic investing and learn about the most dependable and
0:11.8	consistent yet often overlooked investment strategy. Welcome to the Systematic Investor podcast series.
0:19.6	Welcome back to this week's edition of the Systematic Investor series with
0:23.7	Jerry Parker, Moritz Siebert and I, Niels Kastrelarsen, where we do our best to bring you
0:28.4	into the world of rules-based investing by sharing our knowledge and hard-learned lessons
0:33.9	over the last few decades, hoping that you can avoid making some of the
0:38.3	mistakes that we did as usual let me stop by saying good morning to you Jerry
0:43.0	and good afternoon to you Maritz hi both how you keeping good well good morning
0:48.0	good afternoon yeah keeping well adjusted to European time again so that's
0:52.5	always nice after our New York adventure just a
0:58.0	couple of things that sort of caught my eye of course Friday was the first day of
1:04.0	November so when I look at some of these events they probably cover more than
1:08.9	month of October but of course we had a late late
1:12.7	in the month rate cut by the Fed so we saw definitely more risk on trades in
1:20.5	October which you know made the sell-off in fixed-income markets continue for a
1:25.8	while longer and I'm sure that it's
1:30.0	one of the struggles that trendfellers in general had but of course other than that I'll see a change
1:37.4	of the lagarde so to speak at the ECB we still have the uncertainty about US-China trade relations
1:45.0	and now we know that we're going to have a Christmas election in the UK.
1:49.0	So it seems to me like the current decade,
1:53.0	which when you think about it's only two months longer than this decade is over,
	...

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