Actually, I didn’t realize that such a thing called alpha existed until my second year into trading and investing.Christian Sisson —
In continuation to share the story of alpha, my interview turned to Christian Sisson. Christian came from Legacy Education Elite Training program in the same year that I started my journey towards becoming a full-time trader. It’s always enlightening to chat with a peer and understand their unique perspective after being in the market as an active trader for four years.
Want more perspectives? See Previous Story of Alpha with Noah Davidson.
Pearl: During the course of your trading career, when you underperformed the market, how did you recover your edge/alpha? What was the major mental shift/awakening or psychological change? What caused it?
Christian: Actually I didn’t realize that such a thing called alpha existed until my second year into trading and investing. Generating alpha is not as important as being beta followers. Playing the market’s beta and still be profitable regardless of direction—up, down, sideways or shaken by Twitter Wars—, is much more important than the alpha that people search so avidly.
Pearl: In your own words, describe what makes you so special as a trader/investor? What are your own strengths and character to maintain long term Alpha?
Christian: Definitely the mindset. It comes first, it is the base for everything. Second is having clear goals. Maybe these two are the hardest to get, especially if you are new and maybe they have to come together, hand in hand. Systems and strategies, these are just the whats and hows. Which one to choose if you don’t know where do you want to go in the first place? You can buy a ready-to-use trading system that promises alpha generation but if it doesn’t fit your goals, your personality and your daily routine, it’s not going to work. Let’s say it fits. Then the problem becomes: can you execute it?
Pearl: What are the top qualities of a stellar portfolio to grow and maintain performance in your opinion?
Christian: The first step is mastering Portfolio Design. A well-balanced and well-thought-out portfolio can work wonders. Like flowers in a garden, individual positions will perish. The contrary is also true and some positions will blossom and bloom in wonderful profits. The consolidated result counts much more than individual positions. A skilled trader is also a skilled gardener of his/her own portfolio. Assuming you have goals and mindset in the first place because a portfolio is an extension of oneself. The alignment of goals, mindset, and portfolio is essential if you want to generate that extra return.
For me, Beta is much more important than Alpha. Understanding the markets current situation and dynamics and adjust your portfolio to it is much more important than the search to outperform the market with this or that specific asset.
Pearl: What are some of the top development phases you’ve seen for a portfolio to reach alpha and maintain outperformance?
Christian: Know what you want › Clear your mind › Set the goals › Either develop or buy a profitable system › Run the system like a robot › Carry protection against your own convictions › Treat your portfolio like a garden.
Pearl: For a new trader, what are your best advice to help them develop portfolio alpha? What characteristics, psychological state, and strategic mindset they should intentionally develop?
Christian: First, know that the markets are informationally very efficient, meaning that everything is baked into the price in real-time. You are not Warren Buffett in the 50s and 60s devouring financial statements and balance sheets when no one was doing that. Know your place, you don’t move the markets, you follow them. Try to surf well the beta instead of being obsessed with the generation of alpha. Be water, my friend (Bruce Lee).
Second, have goals, know what you want. Remember the Investing Trilemma:
- If you want a safety net, prioritize Safety and Liquidity. Let go of Profitability. This is your safeguard against a possible hardship.
- If you want capital growth, prioritize Profitability and Liquidity over Safety. To accomplish this goal, you will take more risks.
- If you want long-term wealth creation, you will marry Profitability with Safety. Liquidity stays on the sidelines. Think about someone who invests in art, properties, and precious metals.
You can run all three scenarios at once, in three different portfolios. Just acknowledge that the Trilemma is clear: choose two, let one go.
Lastly and most importantly, you will need a temperamental quality. Strong nerves. When Buffett was asked what did he consider the most important quality for an investment manager, he said that it is “a temperamental quality, not an intellectual quality”.
You can buy a ready-to-use trading system that promises alpha generation but if it doesn’t fit your goals, your personality and your daily routine, it’s not going to work. Let’s say it fits. Then the problem becomes: can you execute it?Christian Sisson —
Stayed tuned for more to come.
Access the first part of the Alpha series “The Story of Alpha, Part 1: Does Alpha really exist?” here.
Pearl Li. The Theta Finder. In the Making.
Pearl Li previously has been a product management professional for more than 10 years working at well-known companies such as Amazon and Nielsen Company. She took the leap in 2016 with Elite Legacy Education to learn about building long term wealth through financial market trading/investing. In 2018, Pearl happily left her job to pursue investing/trading fulltime producing theta style trading that generates monthly cashflow. She is thrilled to be a voice on the Tackle Trading platform to share her transformation as she goes through various phases of her growing experience.
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