Why Independent Quants Don't Exist

Why don't independent quants exist? Well it comes down to opportunity cost and scalability. Even with a million dollars and 10% returns (which is higher than average) you would only bring in $100,000 the first year. If you took that $100,000 as a salary and kept investing with a 10% return you only make $100,000. Working for yourself and trading has large risks and fluctuations. Most quants starting their first job will make between $80k-$100k plus a bonus and other benefits like 401k and healthcare. From this perspective it is easier to work for someone else where you are compensated more and have less stress and risk.

Now if you are really good at investing you'll want to scale your operation so you make a lot more than $100k. To do this you'll need investors and this will require other costs such as hiring a lawyer to set up your fund and manage all the investing regulations. As you get more capital you'll also need to hire people to do the accounting, data engineering, trading, and quant finance as you won't have enough time to invest all of the money. Now you end up working for investors and not yourself AND you now will spend most of your time running a firm and not doing the quant finance research unless you find a partner to help with the business side.

Overall people typically end up working for someone else or starting their own firm. Both are from from being independent as you either work for a firm or for investors and both are demanding.

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[meteor]

I know a person who actually is a quant and he work for himself. Yes he is very smart, he knows all the math : Brownian motion, Monte Carlo simulations, SDEs, CUDA programming, etc. But also he has access to a large scale computer system, where he can perform simulations and computations. Because of him I started to look into quantitative finance, I'm not trolling or something.

[Adil-smyz]

One of my old bosses said something similar to this (different industry (consulting), but same sort of sentiment): it's easier to do things on a grand scale when you have the backing/resources of a big name

[daymaker_trading]

It's a miracle today such knowledge is available publicly. Thank you so much!

[timothychung]

🎯 Key Takeaways for quick navigation:

00:04 🧐 *The Biggest Lie in Quant Finance*
- Many aspire to be "full stack" quants, believing they can excel in all aspects of quantitative finance.
- Specialization in specific areas is crucial in quantitative finance, whether in large or small firms.
01:43 🕰️ *The Power of Specialization*
- Specialized knowledge gained over years is invaluable for spotting issues and making informed decisions.
02:55 🌟 *The Illusion of Full Stack Quant*
- Being a full stack quant doesn't mean mastering every aspect; it often involves specialization within a niche.
06:23 💡 *Lifelong Learning in Quantitative Finance*
- Quantitative finance is a field of continuous learning, with new breakthroughs and specialized areas emerging.
09:44 🤔 *Managing Realistic Expectations*
- It's essential to set realistic expectations and enjoy the learning process in the ever-expanding field of quantitative finance.

Made with HARPA AI

[laughoutmeow]

1 million dollars at 7% return will be 70k per year and if hold assets for over 1 year it will be taxed as long term capital gains. If your single and you can pay essentially 0% taxes on the 70k (long term capital gains) after standard deductions. If you make 100k via job your take home will be around 70k after tax. But the job requires you to put in 40 hrs per week.
At a certain point you have to decide if working is worth it.
Also any idiot can make 6-8% a year by buying a holding index.
If you spend 40 hrs per week trading only to make 10% I would say it is not worth it...

[quinnlaya]

So individual quant trading works, but it’s not ideal and kinda stupid. I guess it is okay to do if you want to test your own model and see if you can beat the markets annual average returns, say ideally your return is 10%, but depending on your initial investment, most cases it’s not enough to live with what you earn. Therefore it makes a lot more sense to work for these institutions which have a higher capital and can afford to pay you 100 grand whilst providing benefits which otherwise won’t be present if you traded by yourself. Amazing video dimitri, you’re the only creator whose videos I don’t skip.

[allisterblue]

I suppose there's also the consideration of passive vs active investing. If you have a 10% annual return investing actively, note you could have generated 7% investing in an ETF. As a consequence, you must make more from the extra 3% than you would have made in a regular job. Meaning you would need 3.34 M of capital to boot, assuming you can earn 100k a year as a salary man.

[aegis]

The answer boils down to something simple.

If (and this is a big if) you are successful, you no longer have the time to do it all yourself, so you start a business. Meaning you are no longer an independent quant. Which means you "failed" at being independent, by being so successful you needed to make a firm to help manage it all.

By Definition, a successful independent quant ends in no longer being independent since other people will want to work with you to make money together.

[jonathanlangford]

Not necessarily as a “quant” but I’ve lived the life for 7 years, all of my 30s.
Yes, it would have been infinitely better if I had started with $3 Million.
Regardless, it’s possible if you live somewhere where you can “pay” yourself $50, 000 in January and it funds your life for all of 12 months. For me, that place is East TN.
You won’t live a lavish lifestyle until you are managing $10 million of mostly your own money.

[johntu]

You can try to go it alone, but the hurdles—both financial and practical—are very high. That’s why most quants end up at large firms or starting firms of their own with outside investors. Either way, pure “independence” is rare because genuine success generally requires collaboration, capital, and a full-scale operation.

[AB-zvdz]

I mean sure, assume that every quant is ultra ambition and their only consideration is money. Also assuming every "quant" fits neaty within your definition. There are many quantative traders, I know many, who trade their own money for good reasons and have no desire to work 80 hours at a firm or 80 hours starting their own firm. There are many traders trading their own money with relatively simple strats. You do not need to be doing stat arb to be a quant. The fact this very obvious consideration slipped you by is surprising. Probably intentionally missed it to make an edgy video.

[mr.erikchun]

Wait so those YouTube finance gurus have been lying to us? I believe those ‘’gurus’’ who film themselves all alone with rented cars and living in air bnb make millions and just want to teach us their strategies.

[sugaith]

Thats an example of an employee mindset

[RagionamentiFinanziari]

S&P return w reinvested dividend is above 10% PA from the 60s and almost 11% form the 70s. Not sure why somebody would choose a quant strategy that yields "just" 10%. If that's gotta be your salary, you need to target a much more aggressive rate of return (which could def kill your account tho, so balance those two)...

[bioshazard]

The first 10% of 1M being 100k did me in. I now have zero interest in quants lol, thanks for finally breaking me of the interest!

[rcmag]

I agree. Trading as a full-time job and business would be extremely hard to do. I do it on my own and I am successful but the returns are far greater than 10% AND I have to work at a normal job. If I had to pay myself it would eat into most of my profits. I use it as a way to try and outperform the market, not as a completely self sustaining business.

[ArgzeroYT]

I've outperformed the market using quantitative strategies for over a few years now. Whether I can reach decades remains to be seen. My alpha exceeds 18%.

[algotradervlog]

he is a headhunter. What do you expect him to say😂.

[digvijayjadeja]

Fixed deposits in india are worth 8 percent guaranteed. Those money is backed by government backs. There are bonds worth 7-8 percent government backed. I understand you point but in india one would need at least 25 percent return to make sense into an effort of making money to beat inflation and make profit on top of it

[GalaxyBigBird]

I guess I’ll be the first independent Quant to make it happen 🤷‍♂️

Thank you for laying out the plan tho 😁🙏