Steve Lescarbeau – Master of Mutual Fund Trading Strategy (Quotes and Insights)

Steve Lescarbeau is a mutual fund trader. Jack Schwager’s interview with Gil Blake in the New Market Wizards inspired him to try out the mutual fund timing approach – holding his equity positions while they are gaining and switching to money market funds to avoid downside risks when the equity market is about to crash.

This article looks at the trading career of Steve Lescarbeau, and we end the article by taking some of the most interesting quotes from Jack Schwager’s interview.

Steve Lescarbeau’s life and trading career

Steve graduated with a degree in chemistry from Boston University. He got a job as a salesman using his chemistry background. “I think that a physical science degree is as good as, if not better than, a financial degree because it trains you to be analytical. If there is anything I am really good at, it’s being a researcher”, he said.

Steve was a salesman, selling filtration systems to pharmaceutical and electric companies. He won the salesman-of-the-year award for three consecutive years. He got involved in the financial market in 1983 when he worked for a mutual fund company. He switched to this field because he thought that was the place he could make the most money as a salesman. He had a degree in chemistry which helped, but he had no prior experience in financial trading.

He loved the job, but because of the restrictions placed on him by the company, he realized that if he wanted to take the next step, he would have to do something different from what he had been doing. So he became a stockbroker. He was hired by Shearson Lehman Brothers.

He met Tim Hoik in the managed futures department — an area he did not know about. One day, Steve and Tim went down to meet with some traders at Commodities Corporation. And after that meeting, he told him, “Screw the retail money; let’s go after institutional money.” He cold-called Eastman Kodak, which led to opening a $50 million account — the most significant investment ever in managed futures. They eventually increased their investment to $250 million.

They were making lots of money off the account, but they had a problem — the fund was managed futures with an up-and-down movement in profit, which he said was sickening to watch. So, he started looking for an alternative to the managed futures.

In 1993, Steve got interested in a newsletter written by a guy in Texas. He put out recommendations and tips on mutual funds and had a good track record. Steve called him up and suggested they do a fund. He agreed, and they launched the fund in September 1993. Steve raised the money while the guy traded.

By late 1994, Steve was discouraged by the returns they made. So he began researching mutual funds timing. He later split up with the trading manager and took over the management of the trading account.

During the five years he traded, Steve had realized an average 70% annually compounded return. What was genuinely outstanding about his results was that Steve had achieved them under extraordinary risk control. His worst month ended with a bit of 3%, but his consistency ensured he was profitable.

Lescarbeau works alone at his home in a small rural town outside of Albany, New York.

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Steve Lescarbeau trading strategy quotes

Here are a few excerpts from Jack Schwager’s interview with Steve Lescarbeau:

The same qualities that make you a successful person in whatever you’re doing are going to make you successful in trading. You have to be very decisive, extremely disciplined, relatively smart, and above all, totally independent.


Ninety percent of my success is due to not doing things that are stupid. I don’t sell winners; I don’t hold losers; I don’t get emotionally involved. I do things where the odds are in my favor.


Don’t confuse activity with accomplishment. I think one mistake novice traders make is that they begin trading before they have any real idea what they are doing. They are active, but they are not accomplishing anything. I hardly spend any time trading. Over 99 percent of my time is spent on the computer, doing research.


I think that a physical science degree is as good if not better than a financial degree because it trains you to be analytical. If there is anything I am really good at, it’s being a researcher. I’m not a particularly good trader.


I don’t attempt to prognosticate the market. I react to what happens in the market.


I’m laughing about the people who do make predictions about the stock market.


Trading systems definitely have a life span. When too many people jump on the bandwagon, the market takes it away.

What are some key characteristics of Steve Lescarbeau’s trading strategy?

Steve Lescarbeau emphasizes independence, discipline, and research in trading. He follows a strategy of not selling winners, not holding losers, and avoiding emotional involvement. His success is attributed to avoiding activities that are not productive, spending over 99% of his time on research, and reacting to market events rather than attempting predictions.

How does Steve Lescarbeau view the role of a physical science degree in trading, and what does he consider himself particularly good at?

Steve Lescarbeau considers a physical science degree as good as or better than a financial degree because it trains individuals to be analytical. He views himself as particularly good at being a researcher and values the analytical skills gained from his educational background.

What is Steve Lescarbeau’s perspective on trading systems and market predictions?

Steve Lescarbeau believes that trading systems have a lifespan, and when too many people adopt a particular system, the market takes it away. He does not attempt to prognosticate the market and reacts to market events. He also laughs at the idea of making predictions about the stock market.

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