271 · The Sweet Balance Between Risk and Reward w/ Tom Basso

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Experiencing the brutal bear market of 1973-74 impressed upon Tom the necessity to find ways to hedge risk. This began a multi year long quest to find the right combination of uncorrelated assets, technical indicators and adjust the weightings as needed to provide enough protection to fill in the potholes of equity drawdowns while retaining the bulk of upside potential. Having a sweet balance between risk and reward both in the financial markets and in his personal life has enabled Tom to maintain a serene disposition.

Tom Basso’s Background:

Tom Basso is an American hedge fund manager. He was president and founder of Trendstat Capital Management. He has authored two books, Panic-Proof Investing and the self-published The Frustrated Investor. In 1998, he was elected to the board of the National Futures Association. Basso graduated from Clarkson University in Potsdam, New York in 1974, where he majored in chemical engineering. Prior to his career in trading, Basso worked as an engineer for Monsanto Company. He became a registered investment advisor in 1980 and a registered commodities advisor in 1984. Basso established Trendstat Capital in 1984 and served as its CEO until his retirement. Having retired from active trading in 2003, he now manages his own portfolios and provides guidance to aspiring traders.


Trading in the financial markets involves a risk of loss. Podcast episodes and other content produced by Chat With Traders are for informational or educational purposes only and do not constitute trading or investment recommendations or advice.

Topics & Timestamps:

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  • 0:00 Catching up with Tom after 8 years
  • 5:55 Goal of hedging
  • 8:54 Catalyst to get into hedging
  • 10:50 Early strategies and experiences in hedging
  • 15:30 What triggered Tom to put on hedges before the 87 crash
  • 19:50 Personal hedging as governments are in a race to the bottom
  • 21:30 Hedging in different types of bear markets
  • 24:08 When he puts on and takes off hedges
  • 27:30 Correlations and diversifications
  • 30:30 The ideal correlation
  • 31:50 Different assets Tom diversifies into
  • 37:18 Adding Bitcoin futures for enhanced diversification
  • 40:10 Shifting correlations across time
  • 43:40 Correlations in world stock markets 
  • 50:28 A couple of trades can make the difference
  • 55:20 Behavioral economics
  • 1:00:25 Viewing your life like a movie
  • 1:04:30 How to get in touch with Tom

Tom Basso

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