How did Jim Simons solve the market?

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Introduction  –

During the school days, the subject of mathematics has been very esoteric and mystery for almost everyone, what is the use of mathematics in real life because even an illiterate person can calculate his work without reading the book anyway. When I got to read about Jim Simon for the first time, I understood how important this subject is in economic success. Earlier, there was this belief about mathematics that it is only a matter of doing complex revision of science, the common man does not have much importance in it.

When Jim Simon started his first hedge fund, he did not hire any financial expert, but hired mathematicians and programmers and took the share trading of the stock market to a different level that one cannot imagine. Google’s founder LARRY PAGE and SERGEY BRIN both read about both were PhD holders of computer science who were masters in maths.

The Probability Principles of Mathematics Making Money The decision was taken by Jim Simon at the age of 40, before he had been a professor and decoding for an intelligence agency. The reason for taking a case study about Jim Simon was that the illusions of the stock market that are created in front of the common investor should be removed and with the right investment plan, every investor can earn money from the stock market like any other investment.

Profile of Jim Simons –

  • Name – James Haris Simons
  • Born – 25 April 1938
  • Education – Mathematician PhD holder (University of California), BS from MIT Institute
  • Occupation – Mathematician and Hedge Fund Manager
  • Founder – Renaise Technology
  • Award – Oswald Weblin Prize-1976
  • Book – The Man Who Solved the Market (Author- Gregory Zuckerman) Best Seller Book of New York Times

Quotes of Jim Simons –

  • Do in life. what you like, not what you think you should do
  • Are you making a lot of decisions? , you only have to be 51% right in your decision, just like a boxer does, a trader does.
  • People are most predictable in situations of stress and panic and make wrong decisions.
  • Stories are king in the stock market and not numbers.
  • I am not interested in doing business, it does not mean that I am not interested in earning money.
  • Common Sense and Intelligence This quality being in a person shows the value of that person, it is very rare.
  • Do not invest your investments on the trust of market experts, it is all rubbish.
  • You remain Aamir even without seeing, this is the best way to be Aamir.
  • When you are half down or in trouble, people think that you are going to be in full trouble.
  • He is a mathematician, while investing, how that company is doing business does not matter to him.
  • Mathematicians and scientists have to share conversations and debates to produce good results.
  • Work with the best intelligence people, even if they are more intelligent than you, and don’t give up too quickly.

Early Life of Jim Simons –

Warren Buffett has grown his investments by about 25% growth in his entire investment career and Jim Simons started investing in the market after his forties and today he continues to increase his investments with almost 66% growth. He is known by the name “QUANT KING” and he is known to be an excellent investor in the stock market. He started the first Renaissance Technologies this first QUANT fund in 1982 at his age of 44 years. He was the chairman and CEO till 2010 and later retired, after that he remained in the company as non-executive chairman.

He completed his education from MIT College as a mathematician and in 1961 he completed his PhD. Further, he did a lot of work for the science of mathematics and for this he was given many awards. In 1964, he worked for the IDA, an intelligence organization that had broken many of the intelligence codes of the Vietnam War. After working for an intelligence agency for four years, he went on to teach at MIT College and Harvard University.

In fact, before the start of his share market journey, he was in the mathematics department at Stony Brook University, when he got an opportunity to consult the IBM company and the year was 1978 when he slowly started to understand finance like a mathematician, there his He got acquainted with some of the best programmers and mathematicians of this company, whom he later recruited for his Renaissance Technologies.

Investment Philosophy by Jim Simons –

Although he wants to keep his investment strategy confident, but as he is known by the name “QUANT KING”, he has invested a lot of money for a quantitative analysis which takes a lot of data.In the initial days, he did not want to use his maths skills in this company, but later doing a lot of research. He started investing according to the theory of probability rule, he could get success in the stock market. In the early days, he started a hedge fund named Monemetrics which was later changed to Renaissance Technologies.

So he recruited scientists, mathematicians, physicists, cryptographers and programmers in his first hedge fund company from a very different background than the hedge fund experts of the time who had nothing to do with finance.

This mathematical technique was amazingly effective and his philosophy made the investor a lot of money and he himself became the 23rd richest man in America in 2021 according to Forbes, his net worth was 23,5 US dollars.

Hedge Fund / Renaissance Technologies –

This is a hedge fund company, also known as Rentech, founded by Jim Simons and using mathematical philosophy to make this fund the world’s most successful flower hedge fund, which has become a different example for other funds which are mathematical. By using data for analysis, setting up programming through technology in the market, ie setting algorithms, earn money by 51% probability rule.

In fact, this company uses its investment strategy in a very confident way and its employees also have to follow this rule. The company’s “Madallion-Fund” has been very successful, for 30 consecutive years i.e. 1988-2018, their hedge fund gave 66% RETURNS. Jim Simons stepped down as chairman in 2021 and the new chairman is Peter Brown. According to the 2021 figures of their fund, the investment assets are $ 165 billion. Due to their success, since 2014, the company has kept only the investment of employees and family members and has stopped taking the rest of the investment.

If its technical reason is told, then someone earns a lot of money in the stock market, on the other hand many investors lose their money, it was a decision taken under mathematical strategy. All the investors of the company have earned millions of billions of dollars from this investment, and it has been the most successful hedge fund in the world.

Warren Buffet & Jim Simons  –

Warren Buffet started investing in shares at the age of 11 and today he is 90 years old, that is, in his 80 years of share investment, he called 20% profit or profit from share investment which works like a compound effect. That’s why he is included in the top 5 Aamir people in the world today. On the other hand Jim Simon started his stock trading after 40 years of his age and after initial failure almost thirty years continuously profit from share market at more than 60% rate. Now this proves that it is profitable to do share trading, but we need to know the reality behind it, which they used.

He was a mathematician, engineer, scientist, he did decoding work for the intelligence organization. When he started working in the stock market, he did not first hire any share market expert, he hired computer programmers and scientists, mathematicians, who analyzed the data and understood the market, for this he spent crores of rupees and created an algorithm that used a lot of information. And by developing it, he achieved this position in share trading.

Now we have to decide by looking at these two, on the basis of whose strategy we have to invest. Anyone can become successful in the stock market by following Warren Buffet’s rules of investing, but it is not as easy to follow Jim Simon because he is a mathematician/mathematician who his way of thinking is different from normal people because he is a genius. Hey and such geniuses are very few in the world and it is not possible for everyone to follow their intellect.

Quantitative Technique in Stock Market Trading –

This techniques are made computer based automated program, for which a lot of information base data are collected and analyzed computer based and computer based automated trading is done in the market on a probablitic, information which is completely different from the investment skill of human. It is called an algorithm, which has to keep changing by inputting information continuously.

Renaissance Technologies follow its investment strategy very secretly and invests this fund in every security of the stock market. This technique is completely different from the Finance Technical Analysis which runs on a scientific basis with a probability of 51%.

In this technique, high-class mathematical formulas are used and with the help of computer programs, a lot of data is collected and an algorithm is made, under which it is very difficult to compete this company in front of the good investors of the market who do short term trading.  Because this technique does not run on any emotion, breaking news, it is done on technology by making mathematical formula from an automated system.

Technical Analysis & Artificial Intelligence –

Jim Simon did not know much about the stock market, but by mixing it with his scientific thinking and knowledge of mathematics, he used it in the stock market. Everyone knows technical analysis, but modern stock trading is done through bots using it. Which is quite different and effective from traditional trading, its example is Jim Simon’s hedge fund.

The new investor is influenced by the glare of the stock market and enters but does not practice its nuances, so he has to learn by losing money. Jim Simon hired a computer specialist to run his company, and using his mathematical knowledge, he developed a different technique for investing in the stock market.

Today, the use of technical analysis and artificial intelligence is seen by big financial institutions. This means that if the general trader wants to beat their knowledge and techniques, then they need developed knowledge which is very difficult and very few people are successful in it. That’s why we get to learn the fundamentals of long-term investing and not trading.

Conclusion –

When Warren Buffett was asked in an interview on Jim Simons’ investment strategy, he said that he is a genius and is doing well, but his strategy cannot make money on a large scale in the stock market. He had said this and some facts are also visible because Warren Buffett’s investment is very risk free and Jim Simons’s investment is full of risk, meaning in a way this investment is under the probability rule, so on a large scale he How it will perform is an issue of amendment.

Talking about India, a brokerage house made a data that how many small investors who do trading earn in a year, then very shocking data came out. In which less than 5% of the traders are successful in earning money, it means most of the traders lose money. The important reason for this is that the big finance companies do their investment under the successful strategy of Jim Simon S, who spends crores of rupees for this set up, which the normal trader cannot do, so he cannot compete with the big traders in share trading.

That’s why the investment strategy of Jim Simons is very good, but it does not seem like it to follow for the normal investor and trader. Even if it is assumed that you have a completely different strategy, but to make it successful, there is a risk that you learn by losing your money, so we have to think how we have to earn money from the share market.


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