I heard Peter Borish, Paul Tudor Jones trading partner, speak at a conference a few years ago. He said something that really stuck with me:

“Waterfall strategies are superior to mean reverting strategies. When markets crash, waterfall strategies perform exponentially well and mean reversion strategies may fail”

What did he mean by “waterfall strategies”? He meant momentum and trend following! Not only is that a beautiful way to describe these strategies, but it’s true. It’s important to have a diversified portfolio, but when markets crash, trend following and momentum typically win big.