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At DayForex we have respect for the market and know that only the humble succeed in the end.
Detailed, careful preparation precedes our quest for bold, but not unreasonable, goals.
- Dirk du Toit, Fund Manager
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"Manage expectations. Reward realizations."
Dear Investor Advisor,
I love Fred Schwed's title for his investment book: "Where
are the customers' Yachts?. The title alone made me want to buy it.
Strangely, it wasn’t so much the content of the book, but rather the
selling strategy of the place where I bought it that gave me an insight.
The place was Amazon.com.
Their up-selling strategy (practice) gives five book titles, "also
bought by buyers of "Yachts". Not only do I have all five, but
also have I placed three of the five amongst the top books on investment I
have ever read. As a fund manager these books have cultivated and nurtured
my understanding of managing a specialist forex fund.
In order of importance they are:
- Fooled by
Randomness - The Role of Chance in the Markets and Life (Nassim Taleb)
- Against the Gods -
The Remarkable Story of Risk (Peter Bernstein)
- Reminiscences of a
Stock Operator (Edwin Lefevre)
The other two are:
- A Fool and his
Money - The Odyssey of an Average Investor (John Rothchild)
- Devil take the
Hindmost - A History of Financial Speculation (Edward Chancellor)
Add to this, the following three books from my library and within the
pages of these books I have most of the guidance I need:
- When Genius Failed
- The Rise and Fall of Long term Capital Management (Roger Lowenstein)
- The (Mis)behaviour
of the Markets - A Fractal view of Risk, Ruin and Reward (Benoit
Mandelbrot)
- Infectious Greed - How deceit and Risk Corrupted the Financial Markets (Frank Partnoy)
For good reason, these books contain in their titles words such as "fools,
luck, greed, risk, ruin, devil, reward, gods, chance, random, deceit, ".
The dilemma an investment advisor faces is how to give the “best
advice in the face of randomness". Unfortunately, the definition
of "advice" or "best advice" has been carefully manipulated
by regulatory collaborators to make sure that a cohort of investment advisors who essentially
don’t know what they are doing can partake in the game. But what about the
customer's yachts?
If a trader, fund manager or risk manager confuses his skill and his
luck, or even worse, substitutes in his mind the proceeds of randomness
with the outcomes of perceived skilful analysis, he is not far from ruin. What
follows is painful, sometimes devastatingly so. My non-negotiable rule of "careful
preparation" kept us from soliciting investments as well as financial
advisors in becoming involved in promoting DayForex's investment products
for a few years. It is difficult to pinpoint why the wait has now matured.
Maybe a little understanding of the recent South African history of retail
forex, and my own personal involvement, will assist in answering this.
Tulip-mania. DotCom-mania. Forex-mania. Managed-forex-account-mania. The
more things change, the more they stay the same. Bubbles burst. During a
gold rush those selling picks and shovels profit the most. The thing with burst
bubbles is that they give birth to "skilled fools". Many times it
is those skilled enough to sell picks and shovels during the bubble-mania who then
become fool enough to rush for their own gold afterwards weilding their picks and shovels. But what do they know about prospecting?
"The consiparcy of the Market Wizards and Marketing
Wizards"
Fooled by randomness. Fooled by grandiose ideas. The first is the
problem for traders and fund managers, the latter concerns you, the
investment advisor. A few sobering items to consider:
From a large sample of investment
managers it is very likely that over a period of ten years at least a
handful will consistently, every year, beat the average return - out
of pure luck.
Winning investment managers
advertise, losing ones don't.
Survisorship bias. Investment
results are positively skewed because the marketing wizards only include
the winners' results.
Every year there must be a top
three or top five managers. It may be pure good luck that of a year,
such-and-such is a top manager. It may be pure bad luck that another
manager is at the bottom.
"Market Wizards" are few and far between. "Marketing
Wizards" are as plentiful as flowers after rain.
The solution: Managing expectations, rewarding realizations
The result of bubbles that burst and funds that blow-up is shattered
expectations that affect everyone. Owner-manager, fund manager, risk
manager, trading manager, marketing manager, sales manager, investment
advisor, poor investor. All shattered expectations. What is a shattered expectation?
In this case, an unrealised future claim on an ill-conceived hope?
The only reward an investor gets is the return on his investment. His
gratification depends on the relative return to his expectation, not
relative return to other investor's returns or expectations.
DayForex manages investor expectations with the same acumen and diligence
as investor funds.
Investment advisors are part of the investment eco-system. The two most
important rules for investment success apply to everyone, from fund
owner-managers to investment advisors to investors.
· Make sure you have realistic
expectations.
· Don't reward expectations. Reward
realisations.
Like the explorer Shackleton, we at DayForex Capital Management, believe
that if one is going to be bold, this boldness must rest on detailed and
careful preparation.
Join us on an epic voyage to investment success which includes your
customers.
The reward is worth it. We know, we have been there.
Sincerely,
Dirk D. du Toit
CEO, DayForex
"Men that don't take risks don't drink champaigne"
Russian saying
Get more information
RISK WARNING :
Customers should be aware of the risks associated with over-the-counter, spot Forex trading. In the off-exchange market, also called the over-the-counter market, a retail customer trades directly with a counterparty and there is no exchange or central clearing house to support the transaction. Forex trading is highly speculative in nature, which can mean prices may become extremely volatile. Forex trading is highly leveraged. Since low margin deposits normally are required, an extremely high degree of leverage is obtainable in over-the-counter trading. A relatively small market movement will have a proportionately larger impact on the funds you have deposited. You may sustain a total loss of your funds. Since the possibility of losing your entire cash balance does exist, speculation in the over-the-counter market should only be conducted with risk capital you can afford to lose and which will not dramatically impact your lifestyle.
Leverage risk
Forex trading is highly leveraged. Since low margin deposits normally are required, an extremely high degree of leverage is obtainable in over-the-counter trading. A relatively small market movement will have a proportionately larger impact on the funds you have deposited. You may sustain a total loss of your funds.
