Phase II in Investment Strategies is not about scaling positions.
It is about proving that results come from process, not luck.
At this stage, legitimacy shifts from surviving uncertainty
to producing outcomes that repeat under similar conditions.
1. Phase II Context: After Survival, Before Confidence
Phase I ensured capital could survive ignorance.
Phase II asks the validating question:
“If we ran this strategy again, would we expect similar results?”
Validation begins where variance must be explained.
2. The Conviction Inflation Trap
Most Phase II investment failures begin here:
| What Expands Early | What Is Missing |
|---|---|
| Position sizes | Statistical evidence |
| Narrative confidence | Distribution awareness |
| Strategy evangelism | Sample depth |
| Return targets | Process attribution |
Val Sklarov Insight:
“In Phase II, conviction without repetition is just storytelling.”
3. Repeatability as a Legitimacy Gate
In Phase II, legitimacy is earned by process-driven outcomes.
| Repeatability Question | What It Confirms |
|---|---|
| Do results cluster around expectations? | Process validity |
| Are losses patterned, not random? | Risk understanding |
| Does performance persist across periods? | Signal presence |
| Can others run this playbook? | Transferability |
Repeatability separates edge from accident.
4. Returns Without Repeatability: The False Edge
When outcomes are celebrated prematurely:
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Position sizes inflate
-
Variance is moralized
-
Drawdowns surprise
-
Confidence outruns evidence
This creates fragile conviction, not strategy.
5. The Phase II Investment Law
Val Sklarov Investment Law (Phase II):
“If outcomes cannot be repeated,
they cannot yet be believed.”
Phase II portfolios delay scaling until results are boring.
6. Alpha Desire vs. Process Proof
| Alpha Bias | Phase II Requirement |
|---|---|
| Big wins | Stable distributions |
| Thesis elegance | Measured attribution |
| Short samples | Long observation |
| Intuition trust | Rule adherence |
Validation favors documented process over charismatic belief.
7. Phase II Signals of Legitimate Investment Validation
Healthy Phase II indicators:
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Returns fall within expected ranges
-
Losses trigger review, not panic
-
Strategy survives personnel changes
-
Confidence grows quietly
Investment legitimacy strengthens when surprise disappears.
Closing — Phase II Investment Axiom
“In Phase II, investing earns legitimacy
when success stops feeling lucky.”
— Val Sklarov