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How to Bridge the Gap Between Philosophy and Rules | Scott Foster, Dominion Capital Management | #28

“You are not going to make money because of a formula; you use formulas, but that is not why you make money.” – Scott Foster (Tweet)

Welcome back to the second part of our interview with Scott Foster, President and Founder of Dominion Capital Management.

In this episode, we learn the philosophical rules that drive his firm, and how he bridges the gap between the philosophy behind his decisions and the models he creates. We discuss the increased governmental involvement in the markets and the adjustments that Scott has had to make to adapt to new signals. Finally, we learn the personal habits that help Scott succeed. Thank you for listening to Part 2 of our conversation with Scott Foster.

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In This Episode, You’ll Learn:

  • Why Scott does not worry about model decay due to the principals with which he runs his firm.
  • How to bridge the gap between philosophy and rules.
  • How he created the Sapphire program, his firm’s signature service, and what it took to create it.

    “Model decay is not generally something that I worry about.” – Scott Foster (Tweet)

  • How increased government involvement in the markets has changed his system and made him adapt to new signals in the markets.

    “We always were a low-volume trader but over the years we’ve become even more low-volume.” – Scott Foster (Tweet)

  • Why and how political feedback and involvement are affecting the markets and short term trading.

    “The political feedback is a bit different – because it has no tether – there’s nothing that says that it can’t change.” – Scott Foster (Tweet)

  • How his firm is able to so expertly predict to potential customers their drawdowns and how they contain them.

    “A market is emotionally charged – there are a lot of people with strong opinions and a lot of vested interest that the market move one way or the other.” – Scott Foster (Tweet)

  • That investors spend too much time dissecting the drawdowns and not enough time looking at why and how they made money.

    “I was doing what everyone else was doing at the time, which was thinking of bad volatility as being bad, and trying to figure out how to avoid it.” – Scott Foster (Tweet)

  • The principals of behavior finance and the underlying philosophical principals such as self attribution bias and loss aversion.
  • How alone time and contemplation have led to 80% of Scott’s best trading ideas.
  • The hardest part of being the President of a fund and why it is not the trading.

Resources & Links Mentioned in this Episode:

  • Scott mentions “The Lake Wobegon Effect.” Learn more about illusory superiority, the bias that the Lake Wobegon effect is name after, or Lake Wobegon itself, a fictional town in Minnesota.

    “The Lake Wobegon effect where all kids are above average; every professional in the financial world thinks they are above average – even though we can’t all be.” – Scott Foster (Tweet)

  • Learn more about Mean Reversion, which Scott’s firm looks at closely in the models they use.

This episode was sponsored by Saxo Bank:

Connect with Dominion Capital Management:

Visit the Website: www.DomCap.com

Call Dominion Capital Management: +1 (231) 995-4400 

E-Mail Dominion Capital Management: dominion@domcap.com

Follow Scott Foster on Linkedin

 “I’m a big believer in the trends of your internal numbers – not the internal numbers themselves.” – Scott Foster (Tweet)

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