“Think of this as the only ‘free lunch’ left in finance besides diversification. It’s not about taking more risk; it’s about solving the math problem of the 60/40 portfolio. By making every dollar work twice (e.g., $1.00 buys $1.00 of Stocks AND $1.00 of Managed Futures), we stop choosing between ‘growth’ and ‘diversification’ and just take both.”

“Most hedges bleed money during bull markets. True Crisis Alpha (like Trend Following) is ‘insurance you get paid to hold.’ It offers positive expected returns in the long run and protection when the sky falls. While everyone else is crying over their 60/40, you’re dancing in the blood-stained streets.”

“Restricting yourself to a 100% allocation pie chart is 2D thinking in a 3D market. It’s like watching a movie in 480p when you could be watching in 4K. By expanding the canvas to 140% or 160%, we can paint with ‘broad strokes’ (Beta) and ‘fine details’ (Factors/Alphas) simultaneously without crowding out essential assets.

“This is the chameleon of the portfolio. It requires a bit of Orwellian ‘Doublethink’—accepting that you can be long stocks (in your core) and short stocks (in your trend sleeve) at the same time. While the Bogleheads pray for a bull market, Trend Following is agnostic. It doesn’t predict; it reacts.”

“The industry loves Sharpe, but Sharpe is flawed. It punishes you for upside volatility. Personally, I don’t mind ‘upside volatility’—that’s just making money faster. I focus on Sortino because it only cares about the bad stuff: downside deviation. That’s the risk that actually keeps me awake at night.”

“If everything in your portfolio goes up at the same time, you aren’t diversified; you’re just leveraged to ‘Good Times.’ We want assets that hate each other. We want zigging when the market zags. True diversification feels uncomfortable because something in your portfolio should always be making you slightly angry.”

“Why settle for a 100% canvas when you can have 160%? If your portfolio is only giving you 1:1 exposure, you are leaving diversification benefits on the table. Capital efficiency isn’t reckless leverage; it’s the prudent tool that allows us to afford the ‘insurance’ of alternative assets without sacrificing our core equity growth.”

“This is the only number that actually matters. Volatility is the price of admission, but a deep Drawdown is where investors panic-sell and destroy their compounding. The 2022 ‘Bond Crash’ taught us that even ‘safe’ assets can have brutal drawdowns. We stack returns to shallow the drawdown, preventing the behavior gap from killing our returns.”

“Think of Carry as the boring cousin of Trend Following. While Trend is trying to hit home runs during a crisis, Carry is just collecting the yield for showing up and holding the position. In a flat, choppy market where Trend gets whipped around, Carry pays the bills. It’s ‘getting paid to wait.'”

“This isn’t about timing the crash. It’s about having a ‘convex’ payout that explodes upward when everything else is flushing down the toilet. Most people think they can just ‘buy the dip,’ but Tail Risk Hedging provides the liquidity to actually do it. It’s the ultimate ‘sleep at night’ sleeve.”

“Most ‘balanced’ 60/40 portfolios are a lie. They are 60% stocks but 90% equity risk. When stocks crash, the portfolio crashes. Risk Parity is about being honest with the math. We leverage the safe stuff (bonds) to match the volatility of the risky stuff (stocks) so that true diversification actually has a chance to work.”

“Stop trying to predict the future. You can’t. I can’t. The Fed can’t. Instead of guessing which way the wind will blow, we build a house that stands up in a hurricane, a blizzard, or a heatwave. It’s boring during a raging bull market, but it’s the only strategy that lets you sleep when the rest of the market is panicking.”

“This is the mathematical proof that there is a ‘free lunch.’ By combining assets that are uncorrelated, we reduce the risk of the whole portfolio below the risk of its parts. If your portfolio doesn’t have something in it that you hate right now, you aren’t maximizing diversification.”

“This used to be reserved for Hedge Funds and Endowments. Now, with ETFs like RSSB, we can DIY it. It means getting your S&P 500 exposure (Beta) and bolting a Managed Futures strategy (Alpha) right on top of it. It’s having your cake and eating it too—provided you can stomach the tracking error.”

“It’s the yardstick everyone uses, but it’s a blunt instrument. The problem? It penalizes upside volatility just as much as downside volatility. If a fund rips 50% higher, Sharpe calls that ‘risk.’ I prefer Sortino, but Sharpe is the language Wall Street speaks, so we have to be fluent in it.”

“This is my desert island metric. It basically asks: ‘How much pain did I have to endure to get this gain?’ A MAR of 1.0 means if you want 10% returns, you have to accept a 10% drawdown. Most equity portfolios have a MAR of 0.5 (20% drawdown for 10% return). We aim higher.”

“If MAR is the ‘lifetime achievement award,’ Calmar is ‘what have you done for me lately?’ It’s useful for Managed Futures because their performance is lumpy. It helps us see if a strategy is actually broken or just resting.”

“I love gold, but I’m not building a bunker. Gold is a volatility dampener with zero expected real return. I don’t treat it like a religion; I treat it like an asset class. That’s why I prefer ‘Efficient Gold’ (like GDE or GDMN)—I want the shiny rock, but I also want the capital efficiency to hold stocks alongside it.”

“It’s either ‘Digital Gold’ or ‘Rat Poison Squared.’ I don’t know which, and neither do you. But the asymmetry is undeniable. I treat a 2-5% allocation like a long-dated call option. If it goes to zero, I rebalance and move on. If it goes to the moon, it pays for the rest of the portfolio’s mistakes.”

“MAR is strict; Sterling is nuanced. MAR looks at your single worst day ever. Sterling asks: ‘Okay, but how bad are the drawdowns on average?’ It penalizes volatility where it hurts most (losses) but ignores the volatility we like (gains). Ideally, we want this number above 1.0.”

“The name says it all. Standard deviation doesn’t give you ulcers; deep, long-lasting drawdowns do. I don’t care if a line wiggles upwards; I care if it drops and stays down for a decade (hello, 2000-2013). This metric tracks the ‘pain’ of holding a portfolio. We optimize for low ulcers, high sleep.”

“This is behavioral finance in a single number. It answers the question: ‘How much suffering do I have to buy to get this result?’ An index fund usually scores a 1.0 (1 unit of gain for 1 unit of pain). A good quant strategy aims for 1.5+. We are trying to maximize the pleasure/suffering spread.”

“If you take 20% risk to get 10% returns, you are a bad investor. Period. You’d be better off holding cash. The goal isn’t just ‘high returns’; it’s ‘high efficiency.’ Once you have high efficiency per unit of risk, you can just use leverage (Return Stacking) to scale it up to the return you want.

“Every investor has a number where they break. For most, it’s around -25%. The moment you hit your pain point, all the math in the world doesn’t matter because you’ve sold. We build the Expanded Canvas specifically to keep drawdowns above this threshold. It’s not just risk management; it’s ego management.”

“Everyone chases Beta (market risk). I chase Anti-Beta. This is the hedge that pays you to hold it. Unlike puts that expire worthless, Anti-Beta grinds out a positive return over time because high-beta stocks generally underperform low-beta stocks on a risk-adjusted basis. It’s the ‘Zig’ to the market’s ‘Zag.'”

“This is the anomaly that breaks the CAPM model. Boring stocks beat lottery tickets. Most people crave the excitement of high-volatility tech stocks, which makes them expensive. We do the opposite: we buy the boring, stable stuff and apply leverage to it. It’s less exciting at a cocktail party, but much more exciting for your net worth.”

“Price is the only truth. I don’t care why Cocoa is going up, or what the Fed might do next week. If the price is moving up, we buy. If it’s moving down, we sell. It sounds simple, but it’s intellectually violent because it forces you to ignore every narrative on CNBC. It’s the ultimate ‘I don’t know, but I’ll follow’ strategy.”

“To be a Trend Follower is to be a professional loser who wins big occasionally. You have to be willing to look stupid for months—getting chopped up in sideways markets—so that you are positioned perfectly when the ‘Black Swan’ hits. It’s not a job for the ego; it’s a job for the disciplined.”

“Whipsaws are the insurance premium. You pay small, annoying losses repeatedly so that you never miss the massive, portfolio-saving trend. If you try to avoid the whipsaw, you will inevitably miss the monster rally. I accept ‘death by a thousand cuts’ to avoid being beheaded.”

“Trying to pick a top or bottom is a fool’s errand (or ‘Mean Reversion’ trading, which gives me heartburn). As Trend Followers, we are always late to the party and late to leave. We don’t predict reversals; we let our trailing stops take us out. We capture the middle 60% of the move and leave the exact tops and bottoms to the liars.”

“This is the origin story of everything we do. It proved that you don’t need a PhD or a crystal ball. You need a system, and you need the guts to follow it when it feels wrong. If a bunch of random people off the street could beat Wall Street by following simple breakout rules, so can we.”

“Being a ‘DIY Quant’ is about admitting that your brain is flawed. Humans are wired to buy high (FOMO) and sell low (Panic). Being a Quant means firing yourself as the portfolio manager and hiring a spreadsheet instead. The spreadsheet doesn’t have feelings. The spreadsheet just executes.”

“If you haven’t read it, stop trading and go buy it. It’s the bible. It taught me that there isn’t ‘one way’ to win, but there is one way to lose: lack of risk management. The wizards aren’t wizards because they predict the future; they are wizards because they survive when they are wrong.”

“This is the ‘chicken breast with no seasoning’ of the investing world. It keeps you alive, but it’s painfully boring and entirely dependent on a single outcome: stocks and bonds going up together. If you want average results, build a milquetoast portfolio. If you want excellence, you need some spice (Factors, Trend, Tail Risk).”

“Simplicity is a virtue, but dogma is a prison. The Boglehead philosophy has morphed into a cult that actively insults anyone trying to optimize beyond ‘VTSAX and chill.’ They confuse ‘Simple’ with ‘Easy.’ Just because a 3-fund portfolio is simple to understand doesn’t mean it’s easy to hold during a lost decade. We prefer evidence over ideology.”

“This is about taking the training wheels off. The financial industry wants you to believe you aren’t smart enough to handle leverage or derivatives. They are wrong. With the ETFs available today (RSSB, RSST, GDE), a DIY Quant can build a portfolio in a brokerage account that rivals a multi-million dollar hedge fund. Confidence comes from competence.”

“If you paint on a 100% canvas, you eventually run out of room. You have to sell stocks to buy gold. You have to sell bonds to buy trend. That’s a scarcity mindset. By expanding the canvas to 200% via stacked ETFs, we operate with an abundance mindset. We don’t subtract; we stack. We paint with more colors because we bought a bigger canvas.”

“This is ‘stepping over dollars to pick up pennies.’ Investors will fight to the death to save 5 basis points on an S&P 500 fund, but completely ignore a Trend Following strategy that could save their entire retirement during a crash because it costs 80 basis points. Fees matter, but net risk-adjusted returns matter more. Stop fighting for crumbs and look at the feast on the table.”

“If the Stock Market is a meal, Factors are the nutrients (Protein, Carbs, Fats). Most people just ‘eat everything’ (Total Market Index). Factor investors are nutritionists—we strip away the junk calories and overload on the specific nutrients that make the portfolio grow stronger. Why buy the whole haystack when we have the map to the needles?”

“It’s the ‘Avengers’ strategy. Value is great, but it can suck for a decade. Momentum is explosive, but it crashes hard. Put them together, and they cover each other’s blind spots. When Value zigs, Momentum often zags. We don’t bet on one horse; we bet on the team.”

“Newton’s First Law applied to finance: Objects in motion stay in motion. It is the most uncomfortable factor to trade because you are effectively ‘buying high and selling higher.’ It hurts your brain to buy something that has already gone up 50%, but the data says that’s exactly what you should do.”

“Dumpster diving for diamonds. Value investing is painful because you are buying the stuff everyone else hates. You are buying the ‘ugly ducklings’—boring, beaten-down companies. But buying $1.00 of assets for $0.50 is the oldest way to get rich. Just beware the ‘Value Trap’ (cheap for a reason).”

“The Tortoise anomaly. Everyone wants the ‘Hare’ (High Beta, exciting tech stocks), so they overpay for them. The ‘Low Vol’ stocks get ignored, making them cheap. They win the race not by sprinting faster, but by simply not crashing as hard when the bear market comes. It’s the ultimate defensive equity play.”

“This is ‘Junk Avoidance.’ Most small-cap stocks are trash that dilute shareholders and burn cash. Quality filters screen them out. It’s the difference between buying a lottery ticket and buying the casino. I combine Quality with Value (QVAL) because paying a fair price for a Ferrari is better than overpaying for a Ford.”

“Don’t be a ‘Dividend Zombie’ obsessed with a 4% payout while the company dilutes your shares. Dividends are taxable and inefficient. Shareholder Yield sees the whole picture. If a company buys back 5% of its stock, that’s a tax-free dividend to you. We want Total Yield, not just the taxable kind.”

“David vs. Goliath. Small boats rock more in the storm, but they turn faster than the Titanic. The ‘Size’ factor has struggled recently, but I still tilt this way because large caps (Magnificent 7) are crowded. The trick? Never buy Small Cap without a Quality filter, or you’re just buying bankruptcy risk.”

“This is Goldilocks investing. Value can be a trap; Growth can be a bubble. GARP is the middle path. It avoids the ‘melting ice cubes’ of deep value and the ‘sky-high expectations’ of hyper-growth. It asks: ‘Is this growth real, and am I overpaying for it?’ Usually, the answer is yes, which is why GARP works.”

“This is the ‘Grand Unified Theory’ of factors. Why limit Value investing to just stocks? You can buy ‘Value’ in currencies and ‘Momentum’ in commodities. Style Premia is about diversifying your sources of return, not just your assets. It’s rigorous, uncorrelated, and typically hates standard beta—which is exactly why we love it.”

“I don’t care if the S&P 500 goes to 6,000 or 3,000. Market Neutral strategies (like BTAL or certain AQR funds) don’t need a bull market to survive. They just need the ‘Good Stocks’ to outperform the ‘Junk Stocks.’ It is the purest form of diversification because it doesn’t rely on the rising tide lifting all boats.”

“Why only profit when you’re right? With Long/Short, we profit from being right twice. We buy the Quality companies and short the Junk. We make money on the spread. It essentially allows us to ‘fund’ our long positions with the proceeds from our shorts. It’s high-octane equity exposure.”

“Boring is beautiful. Merger Arb is like picking up nickels in front of a… well, a very slow-moving golf cart. It generates consistent, bond-like returns that have almost zero correlation to the stock market. It’s not about growth; it’s about ‘deal completion.’ It’s the perfect stabilizer for a volatile portfolio.”

“This is the 30,000-foot view. While most investors are obsessing over Apple’s earnings, Global Macro is betting on the Japanese Yen vs. the Euro or the price of Wheat vs. Oil. It’s Soros-style investing. We use it (via ETFs like GMOM) because macro trends often persist longer than anyone expects.”

“Heads I win big, tails I lose small. That is convexity. Most investors have ‘negative convexity’ (panic selling at the bottom). We want strategies that get more powerful as the market gets more chaotic. We want to own the ‘smile’ in the volatility curve, not be crushed by it.”

“This is Fire Insurance. You hate paying the premium every month (the ‘bleed’). It feels like a waste of money during a bull market. But when the house burns down (2008, 2020), Long Vol is the only thing that pays you enough to rebuild the mansion. Without it, you are naked in the storm.”

“The classic trap. It works 99% of the time, which makes you feel like a genius. Then the 1% event happens (Volmageddon, Covid) and you get wiped out completely. Most retail investors are implicitly ‘Short Vol’ without knowing it. We avoid this. We want to be the ones selling the insurance only when the premiums are insanely high, not as a lifestyle.”

“If I have to decide whether to buy or sell every morning, I will eventually screw it up. My mood, my coffee intake, or a scary headline will bias me. Systematic investing is about building a robot to do the job for you. I trust the code more than I trust my cortex.”

“Basically: ‘Trust me, bro.’ Discretionary managers are storytellers. They spin a great narrative about why they bought Tesla or shorted the Yen. Sometimes they are right (genius), and sometimes they are wrong (fired). It’s not repeatable science; it’s performance art. I prefer science.”

“This is just ‘Factor Investing’ with a better marketing department. It bridges the gap between active and passive. It admits that Market Cap weighting is flawed (why buy more of a stock just because it’s expensive?) and fixes it systematically. It’s active management for people who hate active fees.”

“Man + Machine. The Quant side finds the pattern; the Fundamental side checks if the CEO is a crook. It’s particularly useful in emerging markets (like the RAYE ETF) where data can be dirty and ‘blind’ algorithms might buy a fraud. It’s the ‘trust but verify’ approach to systematic investing.”

“This is the ‘Curve Fitting’ sin. If you torture the data long enough, it will confess to anything. You can find a correlation between butter production in Bangladesh and the S&P 500 if you look hard enough. We avoid this by using simple, robust rules (like 12-month momentum) rather than complex, hyper-tuned variables.”

“The next frontier. Traditional Quants use linear regression; Machine Learning uses neural networks. It finds the ‘hidden’ relationships between assets. It sounds fancy, but beware the ‘Black Box’ problem: sometimes even the creators don’t know why the machine is buying. I like it, but I want to see the receipts.”

“The map is not the territory. Backtests are essential for hypothesis testing, but they are seductive liars. They don’t account for slippage, trading costs, or your own emotional inability to stick to the plan during a 20% drawdown. I use them to test ‘robustness,’ not to predict future returns.”

“It’s just a fancy word for ‘Recipe.’ If this, then that. Algorithms aren’t scary; they are discipline encoded into software. They enforce the rules when you are too scared to pull the trigger. They are the ‘Ultimate Disciplinarian’ that never sleeps and never panics.”

“Alpha is a zero-sum game. For you to win, someone else has to lose. Wall Street sells ‘Alpha’ that is usually just expensive Beta in disguise. Real Alpha is hard, rare, and fleeting. It comes from doing what others can’t do (structural arbitrage) or won’t do (buying hated assets).”

“If your ‘Alpha’ crashes when the S&P 500 crashes, it wasn’t Alpha; it was just leveraged Beta. True Alpha is the Holy Grail. It’s the return stream that goes up when the world is burning. Strategies like Trend Following and Market Neutral Arbitrage are the closest things we have to ‘True Alpha’ in the retail space.”

“Beta is the vanilla ice cream of finance. It’s cheap, commodity-grade exposure (e.g., VOO). Never pay high fees for Beta. We use Beta as the foundation—the concrete slab—but we don’t build the whole house out of it. We stack Alpha on top of cheap Beta.”

“This sounds romantic, but in practice, it feels like vomiting. Being a Contrarian means you look like an idiot for years while your neighbors get rich on the latest bubble. It requires an iron stomach to buy emerging markets when the news says the world is ending. The best trades are the ones that make you physically nauseous.”

“The Herd feels safe because of safety in numbers. ‘If I lose money on Nvidia, at least everyone else did too.’ It protects your ego, but destroys your returns. If your portfolio looks exactly like everyone else’s at the dinner party, you are the Herd. And the Herd always gets slaughtered eventually.”

“It’s a theater with one exit door. When everyone is piling into the ‘Short Vol’ trade or the ‘AI Trade,’ the door gets very small. Crowding risk is invisible until it’s fatal. We avoid crowded trades not because they can’t go up, but because we don’t want to get trampled on the way out.”

“I don’t design portfolios for my smartest days; I design them for my dumbest days. I know that in a crash, I will want to panic. An ‘Idiot Proof’ system (like automated rebalancing or defined trend rules) protects me from my own worst instincts. Complexity breaks; simple rules survive.”

“The market does not care what you paid for the stock. That price is irrelevant history. Yet, we refuse to sell a loser because ‘I’m down 10% from my entry.’ That’s anchoring. We also refuse to buy a winner because ‘it’s up 20% from last month.’ Anchoring turns us into historians when we should be futurists.”

“If you own Bitcoin, you only follow Bitcoin maximalists. If you own Gold, you only read ZeroHedge. It feels good to have your bias stroked. But profitable investing requires you to actively seek out the argument that destroys your thesis. If you can’t argue the bear case better than the bears, you have no business being long.”

“This is the ‘Rearview Mirror’ syndrome. After 10 years of a bull market, everyone becomes a growth investor because ‘stocks only go up.’ After a crash, everyone becomes a doomer. It causes us to prepare for the last war instead of the next one. We fight this by looking at 100 years of data, not just the last 100 days.”

“Money is fungible. A dollar from a dividend is mathematically identical to a dollar from selling a share (actually, usually worse due to taxes). Yet, dividend investors treat yields like a free paycheck and price appreciation like a bonus. We treat Total Return as the only truth. Don’t put your money in different mental buckets; it’s all one bucket.”

“We are wired to be bad traders. Evolution taught us that finding a berry bush is nice, but getting eaten by a lion is final. So we fear loss irrationally. This is why we need systematic rules (Trend Following). The algorithm doesn’t feel pain. It cuts the loss before it becomes a lion.”

“The money is gone. It’s not coming back just because you hold the bag. Averaging down on a broken thesis isn’t conviction; it’s ego. The market charges a tuition fee for every lesson. Pay the fee (take the loss), learn the lesson, and move the capital to something that is actually working.”

“When your cab driver is giving you stock tips, run. Exuberance is fun—everyone feels like a genius. But it’s a game of musical chairs. We participate in the party via Trend Following (riding the bubble up), but we keep one eye on the door (trailing stops) so we aren’t the ones left holding the bag when the music stops.”

“Safety is expensive. If you are terrified of volatility, you pay for it with low returns. The biggest risk isn’t seeing your portfolio drop 10%; the biggest risk is running out of money at age 85. We accept volatility (short-term risk) to avoid the real risk (long-term poverty).”