Peter Brandt's 85/15 Profit Rule Echoes Stan Druckenmiller's Playbook: Fewer Trades, Concentrated Bets, Tight Risk Controls

Veteran commodities trader Peter Brandt says that the math behind successful speculation is brutally lopsided, as he teams up with another legendary trader to make his case against broad diversification.

What Happened: On Monday, Brandt highlighted the “Pareto Principle” of trading and speculation on his X account, saying that “85% of my profits have come from 10 to 15% of my trades,” with the remaining 85% of his trades contributing nothing.

“The challenge,” he says, is in preventing “the 85% from destroying the 15%,” something he says rests squarely on disciplined risk management.

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Brandt writes this while quoting a video snippet featuring former hedge fund manager Stanley Druckenmiller, in which the legendary trader says, “I like putting all my eggs in one basket, and then watching the basket very carefully,” dismissing concepts such as “risk-adjusted-returns,” and “diversification” as nonsense.

While he acknowledges that his approach to risk is unconventional, Druckenmiller says most portfolios make “70% to 80% of their money on two or three ideas,” despite holding a dozen other positions.

He says his strategy was to pour more into these “two or three ideas” that he had the most conviction in. Druckenmiller acknowledges that he was lucky to be able to trade across asset classes, “commodities, currencies, bonds and equities,” which he says gave him the discipline to only hold assets with the highest conviction.

“If I didn't have a good idea in equities, I was happy to have no equities,” he says.

Why It Matters: Several other popular investors hold similar views on diversification, the most prominent one being Charlie Munger, who famously said that “diversification is a rule for those who don’t know anything.”

Shark Tank investor Mark Cuban is another famous critic of diversification, having stated in an interview recently that “Diversification? That’s for idiots,” advocating for contracted bets based on thorough research instead.

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