How to Lose Money Investing (and Learn Something on the Way). An interview with Mr Francesco Valenti from Hybla Capital

Getting broke by investing is easier than staying liquid; it takes enthusiasm untampered by patience or math.

The paradox of modern finance: trying to get rich and managing to transform money into less money.

There are several time-tested ways to lose your shirt while “investing.” Let’s run through a few of the classics.

1.   Confuse luck with skill. Make a bit of profit once, decide you’re Warren Buffett’s long-lost cousin, and start doubling down. Markets adore humbling overconfidence.

2. Ignore diversification. Put everything in one stock, one bond, one “can’t-miss” opportunity your brother-in-law told you about. Spoiler: it can, in fact, miss.

3. Trade emotionally. Panic-selling when markets fall and euphoric buying when they rise is basically a masterclass in donating money to calmer people.

4. Chase trends late. Crypto at the peak, tech stocks after a hype wave, real estate when everyone’s flipping condos—it’s financial musical chairs, and you’ll be left standing.

5. Over-leverage. Because what’s better than losing your own money? Losing money you borrowed from someone else.

6.  Forget about inflation and fees. Even if you “earn” 5%, your 2% management fees and 3% inflation politely cancel that out.

7. Skip due diligence. If you don’t understand how an investment makes money, congratulations—you are the investment.

8. Believe every ‘expert.’ There’s no shortage of people who’ll happily charge you to hear your own greed reflected back to you.

To balance all this human irrationality, I spoke with someone who actually knows what he’s doing: Mr Francesco Valenti, a professional investor with more than 20 years of experience as an Asset Manager, first at LGT Group and now at Hybla Capital, his boutique investment firm.

Francesco isn’t just another “finance guy.” He’s someone who understands mindset, method, and discipline. After a master’s degree with Laude from Bocconi University and an early career at Bain & Company, he moved into finance as a trader, then became a senior asset manager at LGT Capital Partners (Liechtenstein Global Trust)—the world’s largest royal family-owned private banking and asset management group, managing CHF 367 billion. After 14 years there, he founded Hybla Capital Advisory.

Fabio: Dear Francesco, can you introduce us to this world? What is the job of an asset manager?

Francesco: First, it’s worth clarifying that there are two main philosophies in our sector: systemic funds and fundamental funds. Statistical models drive the first; the second are based on fundamental data like balance sheets and business KPIs—Buffett’s style, if you like. My experience is with the first. I don’t forecast the future; I manage probabilities.

Fabio: We started speaking about investment, and now you’re mentioning statistics and models. What do you mean by “models”?

Francesco: Quoting Seneca, he said that “I know that I don’t know”, and we start from this quote, older than 2.500 years. Nobody can predict the future, and we, as institutional investors, cannot act like private investors; we don’t feel the markets; we need to model them with algorithms that manage volatility, and based on that, we must compare our performance with benchmarks. We can act in a very short time frame, hours, or use a buy-and-hold strategy, but all must be statistically and scientifically driven. We develop our “Strategy”-the algorithm - and use it to protect our investments, receiving signals that alert us to the worst scenarios.

Fabio: If we compare your structured world with a private investor, what risks would you like to stress if you were advising them?

Francesco: As I described before, our world mainly focuses on protecting against loss rather than becoming rich; we focus on not burning our clients’ money. An institutional investor has several layers of control before acting; the algorithm is one of those. Before using an algorithm, you have to perform a highly accurate back test (a process that simulates a trading strategy using historical data), and several experts and committees should internally approve it.

When we deal, we must follow disciplined strategies that the Board and internal control departments have assessed. A private investor is alone with his ideas, his feelings, the news, his intuition; all of that must be framed within the world’s unforeseeable events and the market makers that can make the markets fluctuate and then we have what you call the paradox of finance, you start thinking of becoming rich, and your money disappears.

Markets are fast; if you try to follow them, you either have the right instruments, not only technical but even intellectual, or the right strategy. The lack of both will drive you broke.

What you cannot see, Fabio, is the pace at which we operate; we must be slow in analysis but fast in execution. We can make swift decisions thanks to our analytical background. This is completely missing in a private investor. In LGT Group, we had more than 40 strategies, which means years of R&D, and the patient is the real performance driver.

Takeaway: Discipline may not be glamorous, but it’s the only form of luck that compounds, either you are a genius or must acquire and cultivate it.