James Simons: How Did He Become a Global Legendary Trader?

LEARN FROM GENERALS OF THE MARKETS - PART 35

James Harry Simons (sometimes known as Jim Simons) is a great American funds manager, philanthropist and mathematician. He was born in 1938 and raised in Massachusetts. He got his BSc in math at the age of 20 and his PhD in math at the age of 23. He was a member of research staff at IDA (Institute for Defense Analyses) from 1964 to 1968. He also taught math at Harvard. He chaired the math department at Stony Brook University in 1968. He was the recipient of American Mathematical Society's Oswald Veblen Prize in Geometry, in 1976.

In 1978, James left the academic world to manage a fund – using a discretionary approach. Since then, he’s been successful. He ultimately founded Renaissance Technologies, a private investment portfolio, in 1982. The portfolio was worth over $15 billion. His fund became one of the most profitable funds in the world. In the year 2004, he earned $670 million He made an income of $1.7 billion in the year 2006, plus $1.5 billion in the year 2005. In the year 2007, he made additional $2.5 billion as an income. He’s therefore one of the highest paid funds managers in the world. Being worth $10.6 billion, he’s declared as the seventy-fourth wealthiest individual on earth (twenty-seventh position in the USA).  James retired in 2009 as CEO of Renaissance Technologies. He lives in New York with his darling wife. He sired five kids: one drowned at the age 24 of in Indonesia, and another was killed in an automobile accident. This is really sad. The remaining three kids are alive. He’s several grandkids.

Lessons

Here are some of the lessons that can be learned from this world trading legend:

1. James’ fund uses algorithm/math models to make trading decisions and open positions. These computer-based models analyze data and prognosticate future prices in the markets, with high degree of success. Contrary to what some experts think, automated trading works, and it can work with permanent success, just like manual trading. What makes robots fail is the fact that their makers program worse expectancy rules into them. If programmers put positive expectancy rules into trading robots, they’ll be victorious in the long-term, just like their human counterparts. Unfortunately, this is contrary to what most trading robot makers prefer (since majority of them aren’t expert traders).

2. Renaissance Technologies hires many experts who’re not traders. These include experts in math, statistics and physics. Their strong academic know-how is capitalized on in the trading world. While success in trading requires some things different than what most other professions require, great professionals in other fields can make a huge difference in the trading world if they are groomed to approach the markets in the right way. It’s not uncommon to see great traders who’re extant or former psychologists, engineers, politicians, businessmen, programmers, doctors, lecturers, sportsmen, astronauts, etc. Have you mastered an area of human endeavor which can be used to your advantage if blended with the correct trading principles? As of James, one professor of physics says it’s stupefying too see a math expert achieving enviable goals in trading. Some people also wonder how that can be feasible. Yes, this is feasible. When you become a constantly successful trader, some would wonder how you manage to do that.

3. James was a victim of Bernard Madoff’s Ponzi scheme. Innocently, he even recommended that the Stony Brook University Foundation invest with Madoff, when he was chairman of that Foundation. The Foundation lost $5.4 million as a result of this. There’s no one that can’t be scammed. Scammers are too smart; even for learned people.

4. James is a great philanthropist: he’s a benefactor of many charity and educational programs in the US and overseas. He co-founded Paul Simons Foundation so that education and health projects can be supported. He donates larger amounts of money to support Nepalese healthcare. This is done thru Nick Simons Institute (to commemorate his son, Nick, who drowned in Indonesia). He founded Math for America, a non-profit organization which seeks to improve math education in public schools. He helped raise $13 million to prevent the shutdown of Relativistic Heavy Ion Collider because of pecuniary shortage. He gave $25 million to Stony Brook University to benefit its math and physics departments. He later gave another $150 million to Stony Brook University. Thru the Simons Foundation, he gave $60 million to start the Simons Center for Geometry and Physics at Stony Brook. He gave $60 million to start the Simons Institute for the Theory of Computing at UC Berkeley. When you become highly successful financially, please think of those you can help. There are more blessings in giving than in receiving.

Conclusion: James’ career and financial success is really enviable, but it didn’t come without effort. For you to enjoy success in trading, you need to put more effort. Success is inspiration plus perspiration. Don’t rest on your oars; if you want to enjoy the rewards, you will have to endure the efforts.

This piece is ended with a quote from Emilio Tomasini, a onetime TRADERS’ columnist (concerning James):

“Maybe you know the name of Jim Simons, that biggest algorithm trader who manages a fund whose name is Magellan, and that he made a cumulative composite yearly return of 40% over the last 15 years. And he became a world legend.” (Source: www.traders-mag.com)

Azeez Mustapha

Market Analyst, Trading Signals Provider and Coach

Ground-breaking lessons from expert traders: http://www.harriman-house.com/experttraders

Source: http://uk.advfn.com/newspaper/authors/azeez-mustapha