The Catalyze podcast: Portfolio manager Ying Hua ’10 on the two approaches to investing and what college students should know about getting started
Photo by Patrick Weissenberger on Unsplash
Ying Hua ’10 is a portfolio manager at Balyasny Asset Management, a hedge fund with $15 billion of assets under management. On this episode, Ying breaks down the two approaches to investing (fundamental and quantitative) and gives personal finance advice for college students. She also shares how to embrace volatility and risk in your career.
Prior to joining Balyasny in 2020, Ying was an analyst at Citadel for four years and an equity research associate at Goldman Sachs before that. She studied economics at Carolina and later received a master’s degree in data science from the University of California at Berkeley.
The intro music for this episode is by scholar Scott Hallyburton ’22, guitarist of the band South of the Soul.
You can also listen to Ying’s 60-seconds of career advice.
“Don’t give yourself any mental constraints on what you can do or you cannot do. Focus on what you want to do. What are your passions?
Second thing is don’t get tripped up about the stability of a job. You should never eliminate some job opportunity because it’s not stable or there is some volatility. We should embrace that volatility and focus on building skill sets that we have to do well in any kind of environment.
And lastly, embrace your uniqueness. You don’t need to be similar to everyone else. You don’t need to fit in. It’s okay to stand out. Use that uniqueness to your advantage to think about a problem in a different perspective, or to come up with a creative solution that no one else thought of.
Don’t be hesitant. And just because you think there are some sort of external factors that make you less of a good candidate for this job—there is no such thing. Focus on what you can bring to the table. Focus on whether it is something you want to do. That’s is all you need.” —Ying Hua ’10
How to listen
Catalyze is hosted and produced by Sarah O’Carroll for the Morehead-Cain Foundation, home of the first merit scholarship program in the United States and located at the University of North Carolina at Chapel Hill. You can let us know what you thought of the episode by finding us on Twitter or Instagram at @moreheadcain or you can email us at email@example.com.
Ying, thank you so much for speaking with me.
Hi, Sarah. Thanks for having me.
So with your job dependent on the stock market, I’m sure you have some crazy hours. Just how early did you start your work today?
Yes, I woke up at four today, and then I got to work by five. Yeah, it’s a little bit tough since I’m based in San Francisco, but work East Coast hours. But it’s something you kind of have to get used to.
Are you naturally a morning person, or is that something that you’ve had to, just as you said, get used to over time?
Definitely not a morning person. I used to be a night owl, actually, but after moving to San Francisco, I was forced into my current schedule. But I’ve been on this schedule for about six years now. I’ve definitely gotten used to it and actually have grown to like it quite a bit.
Well, that’s great to hear. I don’t think I’m cut out for investment banking or working with the stock market in any way. But tell us what a typical day looks like for you. Is there such a thing for your role?
Yeah, sure. I invest institutional money based on my view of what’s a good stock and what’s not a good stock. I specialize in financial names, so think about banks, insurance companies, brokers. There’s really not a typical day, I would say. First thing, I wake up in the morning; I check for the news. Is there anything, any company-specific news? Is there any macro-news that hit the tape? And if there are news, the next step is to figure out, okay, how does this new piece of information affect my view on stocks I cover? Does that create new opportunities to buy certain stocks or sell certain stocks?
Most of the days, there are no sort of knee jerking reactions that need to be done. Then I spend most of my days kind of doing research, think about what’s a good investment, what sort of undercovered opportunities I can work on and figure out. The goal is really by talking to management, by learning about a company, by digging into some sort of industry trend, I can identify overvalued or undervalued stocks and trade based on my conviction level.
Can you break down some of the common approaches? I understand they’re fundamental and quantitative. So can you share kind of the big differences and what someone would need to know to understand?
Yes. So there are generally two approaches, I would say, on the opposite end of the spectrum. First is, as you mentioned, the fundamental approach. This is the approach that I grew up with: you’re making a decision—investment decision—based on the fundamentals of a company. So think about what industry is this company and what does this company do differently versus their competitors? How do you think their revenue will trend in the next year, next three years, next five years? How do you think their margin will trend? Who are their management? Do they have a good track record? These are all things I think make up what a company is, and you make a decision—investment decision—based on that view.
The second approach is almost the opposite end of spectrum. So it’s the quantitative approach. You start with a large universe of stocks. You don’t really need to know what they do. You don’t really need to know who they are, really. And the only thing you need to know is sort of how have they historically traded. A traditional quant investor, they basically try to find patterns in historical trading behaviors and they use those patterns to form a sort of forward looking view. So historically, when this stock trades up or down a certain amount, then the other stock will follow—something along those lines, some sort of pattern.
Fundamental approaches are one, very longer term. So think about your investment time horizon. You don’t care about the next minute or next week or next month. You care about sort of a longer time horizon. How will this company change? You don’t turn over your book as much. You don’t trade as much because if you have a longer term view, it’s not like any view should change in a very short period of time. And it’s subjective. So everyone has opinion on, for example, where Bitcoin is going. That view is very subjective. The quantitative approach is almost opposite of the end of that. There are a lot of quants where their holding period is a couple of minutes or a couple hours or maybe, at most, a couple days. So they trend through their book a lot; they trade a lot.
And then lastly, there is no subjective view. All you’re really basing your investment decision on is some sort of objective history and the pattern you’re identifying. So I would say two very different approaches there.
And where would you say your work lies? Would it be more on one or the other, or is there some kind of combination for the sorts of investments that you focus on?
Yeah, that’s a very great question. So I grew up on the fundamental side. Ever since I entered this field, I focus most of my energy on learning about company, learning about an industry, talking to management. I would say since maybe two to three years ago, I’ve been shifting a bit more to a quant side. I call it the quantum mental approach. I think it’s very valuable for an investor to understand a company, understand industry. But in the last many years, there’s been this new wave of data that became available, a new wave of tools that became available, that I think can be very good supplements to a fundamental investor.
And I’m hearing not just that it’s important, just as a professional in your field to be able to do this, but also reflecting some changes in the market overall. Can you share some insights of what you’ve been seeing in the kinds of ways that people are investing and maybe how that’s been different than in years past?
The first thing we’re seeing is a shift from active investing to passive investing. The way to think about it is the rise of ETFs. I think a lot of people today are very familiar with ETFs. These are, sort of, you can trade a basket of stock at a very low commission cost or low transaction cost. The shift is from investing in mutual funds to investing in ETFs. It becomes a lot cheaper for people to get involved in market. Like, I used 2020 as an example, right. Retail investor involvement in the equity market has grown significantly last year, I think partly because everyone’s stuck at home and had a lot of free time to trade. But partly also, I think, is that in the last couple of years, because of this shift, because of how well the ETF market has grown, the cost of transacting is very cheap now. So I would say that’s a huge industry trend that’s happening.
And I think the second thing is that because of the involvement of retail investors, the shift on sort of what kind of investment would like to make has changed a lot, too, because millennials are a lot more involved in equity market nowadays. ESG becomes a much bigger component of investing. You really didn’t hear that much about ESG a couple of years ago, but now that has become a very hot investment theme. Part of, I think, what will drive the need to combine fundamental and quantitative investing is that there’s availability of data now. There’s just a lot more stuff that’s out there that you couldn’t really incorporate into your investment process that you can incorporate today. Those are, I would say, the major things that I will point to.
Well, I want to pivot a little bit to get at your personal story. I know you were an economics major at Carolina and you thought about being a lawyer. So how did you get into this field to start with and kind of find your way to where you are now?
So I was an econ major. I really loved studying about econ. But at the time, sort of, the goal was to graduate and then go to law school. As part of the Morehead-Cain scholarship, I had to find an internship the summer after my junior year. And it’s kind of funny, but when I looked at who is hiring interns, there were a lot of banks. So I was like, oh, why don’t I just try to interview with them, given that I am studying economics. I thought, maybe I can learn something new. So I ended up getting an internship as an equity research analyst at Goldman. I really liked the job, and I thought the job really fit in my personality very well. This is when I started to kind of rethink about my career choice.
And then the reason why I say the job fits my personality very well is I really like to kind of dig on a sort of a topic. So I love to say, “Hey, give me a topic, give me a question; I will go find materials to support a hypothesis.” I really enjoy that process, and that’s kind of what equity research is. It’s kind of like playing detectives, but with stocks. Companies say this is going to be the industry trend that’s going to drive their growth for the next five years. But the reality is, when I found that based on the data, they reported that the statement is not true. I just really really enjoy that process. So that’s kind of how I started my career.
I was at Goldman doing equity research for about four and a half years, and then an opportunity arrives for a hedge fund job covering sort of a similar space. I actually had a lot of hesitation jumping from an equity research job to an actual investment job. Equity research, you don’t actually do investing; you work on reports. Basically, it’s more like academic, right? You do research and figure out, okay, this is a good stock, and I’ll write a report encouraging my clients to do it.
At a hedge fund, it’s very different. It’s real money that you are deploying. So I was very hesitant on making that move for that. There was a lot of hesitation also because I just didn’t know if my personality was going to fit a hedge fund world. I definitely had a lot of preconceived notions about what a hedge fund world is like and what kind of personality would do well in that world, so I definitely had a lot of hesitation there. But I’m super super glad that I made the jump because I found myself actually really enjoying the process of actually investing, putting money to express my conviction level. I truly encourage that. So that’s kind of my story. It definitely started as an accident, but I feel like I’m very lucky because I ended up in a position where I think it’s a job that fits my personality. It’s a job that allows me to grow and constantly be learning new things, learning about how to think about the world. It’s a job that constantly encourages me to kind of be mindful of everything. So I think I definitely got lucky there.
Yeah, and it’s interesting as well to hear how you think about investing. What would you share to anybody in college right now as they’re thinking about looking for jobs and hopefully also getting into investing, even at a smaller level? What sort of advice do you often pass along, in terms of how to think of where they should meaningfully put their money and just how to go about it starting out?
My view is that use the college years to truly learn about yourself. I think college is all about self-discovery. Use that time to figure out what are your strengths? What are your weaknesses? What are things that you like to do? What are things you don’t like to do? In terms of personal investing, I do think that it’s a very underappreciated topic. When I was in college, I did not think about investing at all. I did not think about personal finance issues at all. And that’s definitely one of the regrets I have. The norm of what the society suggests is you think about graduating college, you think about getting a job, and you think about working until you’re 65 and you’re retired. Very few sort of people will tell you about, “Hey, you should think about passive investing. Hey, you should think about retirement early. You should think about how to use the money you have to generate more money.” And I think that’s definitely something I wish someone else had told me when I was in college. Investing in a way is both easy and hard, right?
I think there are three major components to sort of how to think about investing. The first thing is perhaps the most important—is kind of, what is your worldview, right? What do you think is going to drive the world in five years time? In ten years time? In 20 years time? I am a firm believer that investing should be an expression of your worldview. Investing is essentially putting money behind your conviction. So that’s number one.
The second thing about investing is just diversification, right. Don’t put all your eggs in one basket. Even if you have conviction, don’t put every single dollar you have into one single spot. I think the ETFs is a great solution to that. So whenever you buy an ETF, you’re really buying a basket of stocks. So I think that part has become a much easier problem to solve.
And lastly is just have patience, right. Have a very long term view. Keep in mind the purpose of investing. The purpose of investing is you start to put money into whatever investment you like today so that you will get to enjoy the fruit of that many decades later, right? So that will be sort of my personal investment advice.
I wanted to ask, as a female who’s been in this field, what you tell younger women who might have some misgivings about going into a field that is definitely dominated by one sex?
Yeah, of course. When I joined Goldman, it was definitely male-dominated, but we had in our cohort or class, we did have a couple of females, so I was never, like, paying too much attention to gender when I was at Goldman because I saw other females, there were definitely other female role models. And actually, I didn’t really think about it as much when I was at Goldman.
But it’s kind of funny. When I made the move from Goldman to a hedge fund, all of a sudden, I realized that I was the first female they’ve hired in the San Francisco office ever! I didn’t think too much of it initially, but it was sort of, after a while, I was like, “Oh, that’s kind of interesting!” When I mentioned earlier that I had hesitation about going to a hedge fund, that was sort of part of that hesitation, as well, right? I mentioned that, and I always wondered if my personality was going to fit in. And that personality incorporates gender differences, too. So it was definitely a hesitation. But the funny story is, I thought, I was like, “Oh, I should probably start reading ESPN or try to learn golf or something just so that I can have something to talk to my coworkers about.” I definitely had that mindset when I went in.
But once I joined the firm, what I realized was a few things. Number one is I tried to read ESPN. I did not understand really anything. I think I tried it for like once or twice, and that just didn’t work. And then it’s an interesting thing because there are definitely differences, right. So what are topics that male colleagues generally talk about that’s not work related versus topics that I would normally talk about? What I’ve learned is there is really no point in trying to force myself to be more like them. What I mean is, don’t force myself to read the things they like to read, talk about the topics they like to talk about, force myself to be someone that I’m not. One, I’m not good at it. Like I said, I tried ESPN, and it really didn’t work. And then, the second thing is that it’s also not genuine, right? I think the way to establish sort of a really good relationship with colleagues is actually try to be yourself and be genuine. So then it circles back to, okay, I do remember that when my colleagues want to go golfing, and I don’t golf, then what to do?
What do you do when you’re different from your colleagues? Whether it’s because of gender, whether it’s because of cultural background, or anything else, it’s okay to stand out a little bit. And instead of just trying to force yourself to be someone you’re not, trying to fit in to be exactly like everyone else. I think that’s something that you have to get comfortable with. But also, I think that when we talk about diversity, what I view that’s most important is kind of diversity of a perspective and diversity of your own history, right? The additive thing about diversity is that you can think about a problem from a different angle than everyone else. You can think about a perspective that’s different than everyone else. And that’s actually the beauty of diversity and inclusion. And I think what I learned through my experience is it’s okay to be different. It’s okay to be not like everyone else because that’s precisely what makes me a bit different than everyone else. And this is precisely what gives me a different perspective on things. Don’t create mental constraints for yourself. So I have often heard people tell me, “Hey, I don’t want to go into hedge funds because it’s a male-dominated industry.” I don’t really think that should affect your career decision, right?
I personally think that your career decision should depend on what do you like, what’s your passion, and what are you good at, and really doesn’t, you know, all the external factors such as, like, whether it’s male-dominated or female-dominated shouldn’t be a factor at all. That’s kind of my personal view. There is this myth about I want to pursue a career that’s very stable. And I think that’s kind of one of my hesitations as well when I switched to hedge funds. I’d heard so many horror stories about hedge funds. There is a lot of inherent volatility in the job. I didn’t really know if I wanted to make that jump. And this is also kind of super interesting because when I look back to the cohort of analysts that started with me at Goldman, there are a much bigger percentage of male coworkers who ended up going into hedge funds. I cannot recall anyone else from females to going to hedge funds. And it’s not that they are not skilled enough to get a position if they choose not to go to a hedge fund; it’s because they perceive the hedge fund job to be too volatile.
My current view is that there is no such thing as a stable job. There is no such thing as something where there’s no risk. Every job you take has risk, it’s just a different kind of risk. The non-volatile jobs—what that is is it’s very predictable. You have a very predictable stream of earnings. There’s very little ups and downs. Well, those jobs are actually also the most easy to replicate by whether it’s AI, whether it’s someone else, right? So these jobs, they look like there’s not a lot of volatility. But the reality is, I think you’re just trading short-term volatility or short-term stability for longer-term volatility, longer-term risk of being replaced. There is no such thing as permanent stability. I think what is most important is focusing on building a skill set. And eventually what that allows you to do is it doesn’t really matter what kind of environment becomes the dominant environment and how the environment is changing. You have the skill set to adapt to whatever environment. I think that is the most stable thing. I think that’s sort of something I’ve learned.
I encourage everyone to read any of Teleb’s book, whether it’s, like, Black Swan or Skin in the Game. I think he really expressed that view very very well. And one last thing—I know you didn’t ask about this, but I would just mention, is—whatever job you choose, always keep in mind why you choose that job. I think it’s very crucial. I’ve seen a lot of people in finance who choose to do this job for the wrong reason. There are people who choose a certain career because it generates a lot of income, or if you choose a career because it sounds really good on paper. I don’t think any of that matters. I think the fame, the money, any job brings you is side effects of kind of how you do the job, right? Don’t do the job because of some sort of external things, that’s not internally driven. Like, I think about passion. I think our purpose is all internally-driven things, and I think about money, fame, everything else is kind of external. Always choose your career based on internal factors and not external factors because I think that’s the only sustainable way to truly do something that you will have to be doing for the next 40, 50 years, right? So I think that’s another thing is spend the time in college figuring out who you are, that will determine what your passion is going to be. That’s going to determine what you like, what you don’t like, your strength, your weaknesses, and those will determine which career you choose. So I think that will be the last piece of advice.
Wow! Such great words of wisdom there. Ying, thank you so much for taking the time to join us today. I hope that you can come to Franklin Street at some point in the future.
Thanks, Sarah! It’s great to be here.