We had the exciting opportunity to get in touch with one of the best performing participants of The Investment game 2009 , and he was kind enough to answer some questions. Why participate? What does it take to win? If any of these questions have crossed your mind – then continue reading!
- It was year 2009—the year that S&P hit rock bottom—Do you remember what strategy you employed in The Investment Game.
I do. I was a second year bachelor student. I have already been trading for a year, thus had some knowledge of basic trading techniques. Even though the contest’s name is the ‘’Investment Game’’, it is more a ‘’Trading Game’’ due to a short contest period. You will not win if you buy and hold your favourite company’s stock. In my opinion the only way to win the contest is to ‘’trade’’ your way up, which I did in 2009. The markets were extremely volatile at that time. My strategy was simple, I tried to actively manage the market’s systematic risk with the help of technical indicators and by following world’s economic developments. In other words, I tried to predict the movement of the market indices (mostly MICEX – RUSSIA). When I considered the market to grow, I was buying cyclical companies, mostly oil companies. When I considered the market to go down, I was shorting mostly financial companies. The method brought me the first place in the first stage of the game with a considerable gap between the second place, gap of 20 or more percept. In the second stage, where everyone started again from 0%, I finished 5th or 7th with only 2% away from the first place. By being the only student present in stage 1 and stage 2 top 10, I was quite satisfied.
- It seems that success didn’t come in the form of plain luck for you – how did you start trading?
Luck had a great impact on my results, as I was never wrong. You cannot be always right in real investing. It is fair with all past or future winners. Any investment or trading style consists of two elements: quality of analysis and risk management. By being right in 99% and putting always all your money on the investment bet – you will go bust eventually. All trading and investing contests test your quality of analysis element and completely ignore your risk management element.
I started trading in 2008. I was interested in trading due to very simple reason – I enjoy mind-games. Trading and investing is exactly a mind-game where results are always objective. If you are good at identifying intrinsic values – you earn profit. If you lose – it means your analysis is not good enough. There is no one else to blame. Failures motivate you. Success inspires you. In all outcomes – you end up becoming stronger.
- Do you have any suggestions for the current participant of the DNB Trade Investment Game?
A new guy can start by reading some literature about investing and trading. For instance, there is a series of books ‘’Market Wizards’’ written in a form of an interview with true winners of the investment and trading business – a must read. Having acquired some basic knowledge about trading and investing I would definitely recommend enrolling in a CFA or CAIA programs, as these organizations provide with excellent study materials on investments and finance.
- Do you think the Investment Game can serve as a good starting point before committing to invest real capital?
The Investment Game can help you understand whether you like trading and investing environment. However, if you want to invest real money, you must understand the risk management element. The best transition to real money trading is by having a demo trading account for a year or more. In case you are satisfied with your demo account performance, you can invest your real money.
- What “Inside information” could you give to 2016 participants regarding recent market turbulence?
Well in my opinion, the US market will be in a sideway trend for the following 2-3 months. Thus, it creates a perfect environment for managing the S&P index. Those people who only start studying investments can do the following:
In general, you have three options, either manage systematic risk, firm-specific risk or both.
- In option one you try to predict the movement of the market index – you are buying indices.
- In option two you try to predict positive developments in a company (higher reported earnings than forecasted, new business opportunities, etc.) – you are buying companies.
- In option three – you do option 1 and 2 at once. Choose 5-10 best companies, choose 5-10 worst companies. When you expect the market to go up – buy long your best portfolio. When you expect the market to go down – sell your best portfolio and short sell your worst portfolio. Repeat.
Of course, the best advice is to do whatever you want. I would have selected this advice.
- Finally, it has been 7 years since your staggering performance. How does life treat winners?
Let’s us not exaggerate the results of the game, I haven’t won an Olympic medal. Recently, I have finished my master’s studies and, now, I am working in a financial advisory firm. I keep trading and studying investments. I want to wish all participants of the Investment Game 2016 good luck! Challenge your classmates and crush them!
To register for the DNB Trade Investment Game, click here.