On Investment Style

Just a Name

Be water, my friend. — Bruce Lee

In a way, investment is not that much different from martial arts.

Many white belts set out to “beat” the market and end up getting beaten up by the market. Of course you will get beaten up by the market, it is as inevitable as the daily sun. Those who advanced to black belt without getting KO’ed by the market learned the art of balancing risk and reward. At the end of the day, you don’t beat anything, you better yourself.

People ask me what the investment style of Leaps Capital is. The answer is there is none, or the style is mu (無). Fundamentalists, chartists, contrarian, momentum… There are only names, and names do not define my fund.

Like martial arts styles, investment style is merely a handy name (i.e. a meaningless label) to a collection of tools used in investment. Choosing a style oftentimes means using a set of tools, while not using another set of tools.

It may well be a good strategy to NOT learn how to kick and focus on perfecting punches when you are boxing in the ring, because the rule prohibits kicking. Real-world investing is not a sport with rules, however. Given the ever-changing world, we strive to be open and adaptive.

The Leaps Style

Adapt what is useful, reject what is useless, and add what is specifically your own.
— Bruce Lee

This is not to say that I hop from one tool to another without sensible focus. I will dive into details about the tools I primarily use in the next few months.

For now, a quick outline of the tools I use, which would form my “style” – the leaps style, if you have to give it a name. These tools are chosen as they represent my core strength. At this point, I also know the limitations of these tools reasonably well.

  • Ergodicity Economics - Focus on CAGR, Kelly’s criterion, Tail-risk hedging

  • Noncontinuous Leaps - Phase transition , Ising models, LPPLS models

  • Computational Tools - Hamiltonian monte carlo, TensorFlow probability, GPU