Hey, what's up guys? So, a common

question that I get in my comments is,

if you worked in Wall Street, why don't

you just do what you were doing at work,

but at home? The reason why you can't

just do what you're doing on Wall Street

at home as a retail trader is because

there's this barrier to entry to execute

Wall Street strategies from home.

Technology costs, sometimes inside

information. I mean, maybe I wouldn't

call it that, but you know, you're

getting calls from brokers and stuff,

and it's like a lot of gray area

information, access to quant with PhDs

from MIT.

So, the way I would describe it is Wall

Street is like a well fortified castle

with a moat around it and a drawbridge.

And within the courtyard in the castle

is an orchard with all these like

healthy apples growing. And you can just

pluck these lowhanging fruit. They're

just everywhere. they just plop down on

the floor. But outside of the castle and

the moat is the rest of the world, the

retail world, and it's highly

competitive and the trees are all barren

and there's like a few highanging fruits

still remaining. So, the way a retail

trader would think about and construct

strategies for how to pluck those

highanging fruit are going to be vastly

different from the way uh people within

Wall Street are going to think about how

to pluck the lowhanging fruit. So the

guy on the outside, the retail trader,

he might deep dive on like one strategy

like swing trading or something and find

ways, you know, I would compare that to,

you know, building a ladder or something

or building a trampoline. And the guy on

the inside, they're not going to build

ladders and trampolines. They're going

to try to build like a Zamboni type of

system where they can just ride on it

and just pluck fruits and have them just

fall into a basket on their Zamboni. You

can understand how their efforts are in

totally different directions. One isn't

really that applicable to the other. So

that's the first explanation as to why

you can't just take what you know from

trading within Wall Street and then

apply it to being a retail trader once

you're outside of the castle.

Now that said, there are going to be

people who try to use their alpha from

working on a trade desk within Wall

Street and try to apply it to their own

personal account to make money. They use

that knowledge to go on their phone and

try to make some trades on Robin Hood or

whatever that they believe will have a

positive expectation because of all the

signals that they're getting at work

from brokers or from their their

elaborate trading systems that are built

off of quant models. Initially, uh,

companies would allow this, but then

eventually the compliance department at

these companies started banning that

practice because, well, one, it creates

conflict of interest. You might make

trades on your phone that you could have

made at the trade desk at work, you

know, prioritizing your own profits

above the company's profits. And two,

it's just a distraction, right? You're

being paid to make money for the

company. So, when you're looking down

all the time and like, you know,

prioritizing your own personal account,

like that's a distraction to the

company. It means you're not trading as

optimally for the company as they want

you to. So, for those two reasons and

maybe more, the compliance department

banned people from trading the same

products that the company trades within

their own personal accounts.

Let's talk about Bitcoin. A lot of major

trading firms like jump trading and DRW,

they are pretty active in crypto. They

have a lot of trading signals around

whether they believe it's going to go up

or down in the short term. With all of

this investment into crypto, a lot of

the traders asked the 401k

administrators to allow Bitcoin to be

added as one of the asset classes that

you could invest in through your 401k.

And there was a lot of debate over it.

But then the 401k administrators within

the company uh eventually said no

because they said it's too risky. So

it's kind of interesting, right, within

a trading firm that already is heavily

active with crypto that they won't allow

their traders to invest in Bitcoin in

their own 401ks. But at the same time, I

think the standards for risk within a

401k and within a trading desk are going

to be vastly different. So I can

understand that perspective. The larger

point being that even within a

quantitative trading firm, choices

within your 401k are very conservative.

So you have your standard S&P 500 funds

and you have your international fund and

a bond fund and a few target date funds.

I just want to let people know that that

a lot of the quant traders within tier

one trading firms, large percentage of

their retirement savings are just

sitting in very vanilla assets like the

S&P 500. And even me personally, you

know, I've answered this question

multiple times in my comments, but I

have the vast majority of my personal

savings in the S&P 500 and NASDAQ and

things like that. I'm a pretty vanilla

investor with my own personal money when

I'm not actively trading it. Now, let's

talk about a couple of the other

investments that quant traders tend to

make. When uh gold and silver were

rallying like crazy, I want to say circa

2012, one of the traders from one of my

previous trading firms that I worked at

bought silver at the very top. I think

silver was trading at like 45 or

something and he bought it to someone

else who sold it at the top. So in

defense of the other trader, they made

that trade right at the top. These guys,

they're both excellent traders within

their trading firms. You know, it goes

to show you that being an excellent

trader within Wall Street doesn't mean

that your miscellaneous speculations

outside of Wall Street are going to go

well. Another quant trader and portfolio

manager, this guy has the mightest

touch. Uh he's a partner at the previous

firm I worked at, but every trade desk

they move him to, he just he just makes

all the right decisions and then he

turns losing trading desk into winning

trading desk. They just like move them

around. Move them to London, move him

here, move him there, and he just goes

there and he he he figures out what's

going on and then it becomes a

profitable trading desk. But this guy

who's such such a brilliant portfolio

manager, he he told a story during happy

hour once where he got really caught up

in trying to find these patterns and the

uh lean hogs and live cattle futures

markets and he said he blew out almost

his whole net worth over some uh some

futures trades.

>> Another partner at my previous firm,

he's also a partner at Revolution

Brewery, which is one of the uh

breweries in Chicago. That's a bit more

of a conservative investment. But a lot

of these guys, these white guys from the

Midwest really like beer and breweries.

They like this idea. At least two

separate pit traders I know of, they

made a couple of big bonuses and then

they started their own breweries. So I

think uh for a lot of these traders,

trading is just this way to make fast

money and then they eventually move on

to a kind of chill job that they like.

Another uh quant trader I know of, he

worked at the hedge fund division of the

last firm I worked at. He worked on the

index rebalancing team. For those of you

who don't know, index rebalancing is

when say the S&P 500 introduces a new uh

name. You know, like when Tesla joined

the S&P 500, they have to push something

out so that it stays 500 companies. A

lot of big banks have this department

that tries to forecast which names are

going to join the S&P 500, which ones

are going to get removed and try to get

ahead of those moves because then you

can make money from it, right? This guy

is obsessed with real estate,

particularly in Texas.

Basically, every time he gets a big

bonus, he's like, "Oh, yeah, that's

going straight into real estate, bro."

And he just buys new properties. He owns

a ton of them outside of like Houston,

Dallas, Austin. I think his wife is sort

of like the property manager. She just

kind of manages it part-time. So, he's

just slowly building up his real estate

empire in Texas. And he's been doing

this for a while, so he's probably up a

lot of money on it. Another large

percentage of quant traders will just

invest in other people's startups. I

think that's a fun way to spend your

money, but you know, it's high risk,

high reward, which I guess is no

surprise since, you know, you work in

quant trading. One of them is a partner

at one of the major uh restaurants in uh

River North Chicago.

Of course, there's the whole group of

quant traders that are really bullish on

Bitcoin. Some of them own a ton of

Bitcoin from back when Bitcoin was

trading like at 200, 300. So, a lot of

those guys are basically like retired,

but they're still trading at work just

to trade and their Bitcoin's worth

millions and millions of dollars. So, I

guess they just hold diamond hands

through all those volatile swings cuz,

you know, quant trading is a risky

career anyway. So, they just have a

higher risk tolerance than most people.

I think the takeaway from all of the

places that these quant traders invest

is that if you're going to average it

out across all of these people, like the

guy who lost money buying silver at the

top, the partner who was making

speculative bets on lean hogs and live

cattle and almost blew out his whole net

worth, you know, and then you compare it

to, you know, some of the the

investments that probably just kind of

went sideways, like the friends who

maybe opened breweries or were invested

in restaurants. Um, and then you compare

it to the guys who bought Bitcoin and,

you know, made ridiculous returns. If if

you take the average of all of these

guys, it's probably just the same as

investing in the S&P 500. And so, the

takeaway of this video is that from my

sample space of I'd say 20 to 30 people

that I talked to, quant traders, it

doesn't seem like they have any extra

alpha in their decision-m just because

they worked within Wall Street. My point

being that the skill set to perform and

be successful as a trader on Wall Street

is very different from the skill set to

make money as a retail trader or as an

investor outside of Wall Street. I

circle back to the idea that the most

passive investment vehicle for a person

who is outside of Wall Street and no

longer has all that Wall Street edge

from being inside the castle of Wall

Street, I think, is just to invest in

the broad markets. S&P 500. It has the

best ratio of work and effort, like

maintenance required versus returns. I

mean, it's completely passive. You just

let it sit there and it averages 8 to

10% annually. And yeah, just seeing how

all these friends and how their

investments have done, I still stand by

that. Being a conservative, vanilla

investor, I think that that's that's the

wise play with your money. But let me

know if you disagree in the comments.

Take care.