If you are just getting started with quant investing, this article is for you. It shows you the three biggest mistakes new investors make, and how to avoid them. You will learn how to pick a strategy that fits your personality, why sticking with it matters more than short-term results, and how to protect your portfolio from a single bad stock.
You get practical tools to build your own plan - step by step. If you want to invest with more confidence, this guide gives you the roadmap.
Estimated Reading Time: 6 minutes
The 3 Most Common Mistakes New Quant Investors Make (And How to Avoid Them)
Quant investing is simple, powerful, and proven. But like anything new, it can feel overwhelming when you first start.
- You are using a system.
- You are following data.
- But what if the system does not work?
- What if a stock crashes?
- What if you picked the wrong strategy?
In this post you will learn the three most common mistakes new quant investors make and how to avoid them. You will also learn how to build a plan that fits your personality, so you can invest with more confidence and less stress.
Mistake #1: Skipping the Step of Finding Your Strategy
One of the biggest mistakes you can make is copying someone else’s strategy without knowing if it fits you. Many investors start with the strategy that had the highest past return. But that is not the best way to start.
The best strategy is the one you understand. It is the one you believe in. It is the one you can stick with during both good times and bad. That means your strategy should match your goals, your risk tolerance, and your personality. Not everyone is built to follow deep value or fast momentum, and that is okay.
You can find more information here: How to find your best investment strategy – not the one you expect
A great place to start is the Qi Value strategy. It uses the best valuation ratios we have tested and has a strong long-term track record. It is simple to understand and easy to implement with the Quant Investing screener.
Read more here: How Qi Value Turned $10K into $176K
Mistake #2: Quitting Too Soon After a Few Losses
This mistake is common and painful.
You follow your strategy.
You buy a few stocks.
Then one drops 10%.
Another drops 15%.
You panic. You think the strategy is broken and stop using it. But the truth is, every strategy has losing trades.
Even great strategies have losing months or years. That is normal. What matters is how you respond. If you give up too early, you never give the system a chance to work. Your real edge comes from following the strategy over time, not just for a few trades.
We recommend giving any quant strategy at least 12 to 24 months. This gives you a big enough sample size to see the long-term results start to show up. Let the strategy play out (not the individual investment ideas) that is where the magic happens.
Mistake #3: Holding Too Few Stocks, Taking Too Much Risk
This mistake hurts because it feels logical. You find 10 stocks that look great. You put 10% of your money in each. Then one stock drops 30%. Suddenly your whole portfolio is down 3% from just one pick.
This is why size matters. If you are using a fully rule-based system, you should not expect every stock to win. That is why you need to hold more stocks. This spreads your risk and gives your strategy room to work.
We recommend holding at least 30-50 stocks if you are following a pure quant approach. This gives you the best chance of capturing the edge without getting hurt by one or two bad picks. You are betting on the system, not on any one company.
Build a Simple Plan That Fits You
To avoid these mistakes, build a clear plan. Your plan does not need to be complex. It just needs to answer four questions:
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How will you screen for stocks? Use the Quant Investing screener to screen by value, momentum, or quality.
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How much research will you do? Decide if you want to do deep research or follow a ready-made strategy like Qi Value.
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When will you sell? Use a 20% trailing stop-loss or a Piotroski F-Score rule – if a stock falls below an F-Score of 5 it gets sold, for example.
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How will you manage risk? Set limits on individual investments, world regions, and industry sector exposure. Stick to the system.
Look at the flow charts at the bottom of this article for ideas: This is how we select ideas for the Quant Value newsletter. This structure keeps you grounded. It turns investing from stress into a step-by-step plan.
Increase Your Results with These Smart Filters
Once you are comfortable, you can improve your strategy with a few simple upgrades:
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Piotroski F-Score: Helps you avoid weak companies with poor financials. Also works as a sell signal. Piotroski F-Score back test
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Momentum: Adding momentum filters can increase returns. Start with simple 6-month or 12-month price changes. How Momentum Can Help You Beat the Market - Research Proven
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Country and sector limits: Avoid putting too much in one country or industry. Limit any one region to 15–30%.
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Currency risk: If you invest outside your home country, consider setting limits or using currency hedges. To hedge or not to hedge currency risk in your stock portfolio.
Closing Thoughts: Let the System Do the Work
Quant investing works because it removes emotion and replaces it with structure. But it only works if you let the system do its job.
- Start with a strategy that fits you.
- Stick to your rules.
- Spread your bets.
- Let your strategy breathe – give it time to work.
That is how you get the results that show up in the backtests, in real life.
And if this feels like too much, you can always start with the Quant Value newsletter, which follows a proven system with a 15+ year track record. We do the work. You follow the plan.
Quant Value Investment Newsletter – Your 90/10 Edge
FREQUENTLY ASKED QUESTIONS
1. How do I know which quant strategy is right for me?
Start with a strategy you understand and believe in. If it feels confusing or stressful, it will be hard to stick with it during tough markets. Look for a style that fits your personality and risk comfort. For example, if you like undervalued companies, try a value strategy like Qi Value. If you prefer fast movers, look into momentum. The best strategy is one you can follow with confidence.
2. What should I do when one of my stocks drops a lot right after I buy it?
Do not panic. Even good strategies have losing stocks. What matters is the overall system, not one trade. Stick with the plan and follow your rules. If you use a stop-loss, sell when the rule says, not when you feel fear. Giving your system time to work, at least 12 to 24 months is important.
3. How many stocks should I hold in a quant portfolio?
Aim for at least 30-50 stocks if you are fully using a rules-based system. This helps reduce risk from any single company. Think of it like this: you are betting on the system, not on any one business. More stocks = more chances for your system to show its edge.
4. Can I still do some research on the stocks my screener picks?
Yes, you can. Some investors like to add a second filter like the Piotroski F-Score to screen for stronger financials. You can also check the news or use a checklist. But the key is to avoid second-guessing the system too much. Use your research to verify, not override, the strategy.
5. How do I stop myself from quitting a strategy too early?
Write down your rules and timeline before you start. Remind yourself that every strategy has drawdowns. If your plan says, “I will follow this for 2 years,” then commit. Review your progress once per quarter, not every week. Focus on the system's long-term record, not short-term noise.
6. What if I do not have time to manage 50 stocks?
Use a newsletter like Quant Value that gives you pre-selected stocks based on a proven system. It takes about 30 minutes a month to manage and follows a clear strategy with rules for buying, holding, and selling. This lets you stay consistent without doing all the work yourself.
7. How do I protect myself from big losses in quant investing?
Use simple risk rules. For example:
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Sell any stock that drops 20% from its high (trailing stop).
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Sell if a company’s financial score (like the Piotroski F-Score) drops too low, below 5 for example.
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Do not put more than 2% of your money into one stock.
These steps help keep small losses small, so winners can carry your results.
