No Pressure to Grow

Making money in the markets is hard enough without the added pressure of bloated business costs. The most important thing we can do as managers is to stick to our investing strategy (assuming of course that it’s a viable one).

It doesn’t get easier when you maintain an expensive staff, rent out an office space in a major financial hub or spend buckets of money on marketing either. I’d argue that the latter two do not help improve your returns at all, but only benefit the manager. 

Imagine trying to keep a clear head with that massive monthly nut always on your tail? With the threat of staff leaving for greener pastures when you’re underperforming? Or worse, when your biggest investor representing the bulk of your AUM wants to have a talk about why the past two quarters weren’t up to their standards?

Eventually you’ll crack. The pressure to make money this month or quarter increases to the point where you cannot follow your system anymore. You become focused on trying to make money any way possible. You become a servant to your overhead and your largest investors. The foundation of your business, that is your strategy and ability to stick to it, crumbles under these very common and very real pressures.

A simple solution? Spend below your means. Humans have historically had a lot of trouble with this. Especially those with aspirations of being a hotshot fund manager or startup founder. Part of allure and fun is to look the part. What’s the point of being rich if you don’t flaunt it, right?

Vanity is a weakness. 

I like to keep both my business and personal expenses way down. Even if they doubled, I wouldn’t sweat. I feel no pressure to ramp up. With my current operation, I can manage $10 million as easy as I could $200 million (and probably a lot more). The important thing is to keep the lights on so I can continue executing my system to perfection. Doing so vastly increases the odds of long-term success. I know my wife, son and investors can get behind that.

2 thoughts on “No Pressure to Grow”

  1. Michael, you have perfectly articulated some of the downsides of managing other people’s money versus trading your own portfolio. Standpoint Funds Management, which I am the Chairman of, has the same 5 people we started the BLNDX fund with on January 1, 2000. Eric Crittenden, the Chief Investment Officer, thinks we can manage another billion with a “B” with only adding one person. Keeping your fixed overhead down, your business model simple and your automation high really reduces the pressures that can come from every direction both outside and inside. I retired from the biz in 2003 and have spent the last 20 years smiling and enjoying my retirement while fooling around with the website. And, I am driving a 3 year old Kia Sorrento and still consulting on a cloud-based computerized simulation and trading platform trying to make my trading even more efficient. Old habits die hard. Great blog. Enjoy the ride!

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