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I don’t know your background. But I’ve worked at an investment bank the past 15 years and have traded every kind of stock, bond and derivative there is. With

by 300bps 6y ago

I don’t know your background. But I’ve worked at an investment bank the past 15 years and have traded every kind of stock, bond and derivative there is. With respect, you sound a little bit like every new programmer that I’ve worked with. They get a taste of learning about finance and suddenly become day traders. They make some money and then suddenly they give it all back and more because they really weren’t understanding what they were doing. In general, anyone with a full time job that thinks they can out-compete full time traders that specialize in the exact instrument that you are trying to trade will have a very expensive lesson some day. If you really want to pursue it at least take the level 1 CFA exam. If you can’t pass that you don’t have much of a chance and if you can pass that you’ll probably realize you don’t want to do it.

smabie 6y ago
If you're interested, check out my blog: https://cryptm.org/category/Posts.html https://cryptm.org/category/Posts.html I used to work in finance doing portfolio analytics. I'm not really advocating day trading, but rather using quantitative methods for optimal portfolio construction.
- arkis22 6y ago
  >For example, if we purchased a 2x bull leveraged S&P 500 ETF such as SSO, we would choose an appropriate weight to cancel out the leverage, 0.5 in this case. If we kept the rest of the money in cash, the return of the portfolio would only be slightly worse than that of the S&P 500, due to the 0.90% expense ratio we pay. A 2x bull leveraged etf replicates daily moves. your long term return to expense expectations are completely off.
  - 300bps 6y ago
    You are exactly correct. So many people are buying these synthetic instruments without even reading the prospectus that clearly states in plain language what you said but they still buy them expecting > daily tracking. I’ve seen so many strategies that technology people come up with (including myself) that look great on paper but don’t take into account the prospectus or things like market conditions, counterparty risk, backwardation, contango, etc.
    - atombender 6y ago
      Out of interest, what's your take on Hedgefundie's now-infamous UPRO/TMF risk parity portfolio [1], which is currently 55% UPRO, 45% TMF? [1] https://www.bogleheads.org/forum/viewtopic.php?f=10&t=288192 https://www.bogleheads.org/forum/viewtopic.php?f=10&t=288192
  - smabie 6y ago
    You're right that 0.9% is a lot, but the expenses get absorbed by the bond yield. The total difference of return between 0.5*SSO and SPY over the ten year period (2010-01-01 and 2020-01-01) is 28%. Maybe you're right that that's more than "slightly" worse, I'll change the wording. Moreover, when doing at the historical returns, I do use UPRO, not just 3xSPY, so the expense ratio is included. It's not included in the chart that goes back to 2004, but I do mention that that one is synthetic and inaccurate.
    - arkis22 6y ago
      I don't see 2020 in your graphs
      - smabie 6y ago
        Its not labeled on the axis. But the analysis is up to last Friday. It's also easy to see that the huge drop and rebound at the end of Coronavirus. The start and end date are also mentioned in the post. Edit: actually it's on all the graphs. https://cryptm.org/assets/iret.png https://cryptm.org/assets/iret.png
  - kelnos 6y ago
    > > the return of the portfolio would only be slightly worse than that of the S&P 500 If you "know" that a particular portfolio will return less than another portfolio, why would you not choose the one that returns more?
JauntTrooper 6y ago
I'm also an investment banker and a CFA charterholder as well. All my assets are in a simple 3-fund, fully passive portfolio.
chunky1994 6y ago
Could someone with your experience help me on where to get started if I want an in depth knowledge of the kind of stuff you use on a day to day basis? Would preparing for and writing the level 1 CFA be a good start? (I'm a mathematical physics graduate who's done quite a bit of software in finance but not specifically in trading). I've read quite a bit of quant material, but I would also like to know what to learn from someone who is steeped in the industry as I'm sure my knowledge is quite a rough approximation of what I should actually know if I were to claim any expertise.
- akg_67 6y ago
  CFA Level 1 official prep material is very good. IIRC, these are set of 6 books. You can get second hand older prep material from eBay/Craigslist/FB for cheap.
fossuser 6y ago
> “ In general, anyone with a full time job that thinks they can out-compete full time traders that specialize in the exact instrument that you are trying to trade will have a very expensive lesson some day.” I hear this a lot and it’s definitely something I would expect to be true. But I’ve been repeatedly surprised that it’s not. I’ve made a lot investing on the side (usually just stock, sometimes calls - recently for peloton in January, stock for tesla in 2012 which I sold early last year before the crazy recent rise, stock for Apple, Amazon, Nvidia, Facebook, AMD). Am I stupid, lucky or both? Yes longest bull run in history, but investing in large tech companies you think are stable long term with good CEOs when you know the field (Apple, Amazon) seems pretty easy. When you read a lot of comments from traders on the east coast they seem like they misunderstand the companies, or are not focused on long term strategic moves. I’m mostly positioned in total market index funds with a couple large positions in companies I think will continue to outperform long term, but it doesn’t seem that hard to do better than traders. Plus the index funds contain a lot of companies I would never personally invest in if they weren’t in the fund, still good to hedge against my own (likely) arrogance.
- arkis22 6y ago
  If you bought stock in these companies and didn't sell out at any time, do you really think you're competing with traders?
  - fossuser 6y ago
    I did sell each of them after while (once I got long term capital gains and needed the money for something else or wanted to move to a different stock). So day traders no, but other traders yes? Particularly the peloton calls (2yr expiration leaps) were an explicit trade against some industry person that was extremely wrong.

by 300bps 6y ago

smabie 6y ago

If you're interested, check out my blog: https://cryptm.org/category/Posts.html https://cryptm.org/category/Posts.html I used to work in finance doing portfolio analytics. I'm not really advocating day trading, but rather using quantitative methods for optimal portfolio construction.

arkis22 6y ago
>For example, if we purchased a 2x bull leveraged S&P 500 ETF such as SSO, we would choose an appropriate weight to cancel out the leverage, 0.5 in this case. If we kept the rest of the money in cash, the return of the portfolio would only be slightly worse than that of the S&P 500, due to the 0.90% expense ratio we pay. A 2x bull leveraged etf replicates daily moves. your long term return to expense expectations are completely off.
- 300bps 6y ago
  You are exactly correct. So many people are buying these synthetic instruments without even reading the prospectus that clearly states in plain language what you said but they still buy them expecting > daily tracking. I’ve seen so many strategies that technology people come up with (including myself) that look great on paper but don’t take into account the prospectus or things like market conditions, counterparty risk, backwardation, contango, etc.
  - atombender 6y ago
    Out of interest, what's your take on Hedgefundie's now-infamous UPRO/TMF risk parity portfolio [1], which is currently 55% UPRO, 45% TMF? [1] https://www.bogleheads.org/forum/viewtopic.php?f=10&t=288192 https://www.bogleheads.org/forum/viewtopic.php?f=10&t=288192
- smabie 6y ago
  You're right that 0.9% is a lot, but the expenses get absorbed by the bond yield. The total difference of return between 0.5*SSO and SPY over the ten year period (2010-01-01 and 2020-01-01) is 28%. Maybe you're right that that's more than "slightly" worse, I'll change the wording. Moreover, when doing at the historical returns, I do use UPRO, not just 3xSPY, so the expense ratio is included. It's not included in the chart that goes back to 2004, but I do mention that that one is synthetic and inaccurate.
  - arkis22 6y ago
    I don't see 2020 in your graphs
    - smabie 6y ago
      Its not labeled on the axis. But the analysis is up to last Friday. It's also easy to see that the huge drop and rebound at the end of Coronavirus. The start and end date are also mentioned in the post. Edit: actually it's on all the graphs. https://cryptm.org/assets/iret.png https://cryptm.org/assets/iret.png
- kelnos 6y ago
  > > the return of the portfolio would only be slightly worse than that of the S&P 500 If you "know" that a particular portfolio will return less than another portfolio, why would you not choose the one that returns more?

JauntTrooper 6y ago

I'm also an investment banker and a CFA charterholder as well. All my assets are in a simple 3-fund, fully passive portfolio.

chunky1994 6y ago

Could someone with your experience help me on where to get started if I want an in depth knowledge of the kind of stuff you use on a day to day basis? Would preparing for and writing the level 1 CFA be a good start? (I'm a mathematical physics graduate who's done quite a bit of software in finance but not specifically in trading). I've read quite a bit of quant material, but I would also like to know what to learn from someone who is steeped in the industry as I'm sure my knowledge is quite a rough approximation of what I should actually know if I were to claim any expertise.

akg_67 6y ago
CFA Level 1 official prep material is very good. IIRC, these are set of 6 books. You can get second hand older prep material from eBay/Craigslist/FB for cheap.

fossuser 6y ago

> “ In general, anyone with a full time job that thinks they can out-compete full time traders that specialize in the exact instrument that you are trying to trade will have a very expensive lesson some day.” I hear this a lot and it’s definitely something I would expect to be true. But I’ve been repeatedly surprised that it’s not. I’ve made a lot investing on the side (usually just stock, sometimes calls - recently for peloton in January, stock for tesla in 2012 which I sold early last year before the crazy recent rise, stock for Apple, Amazon, Nvidia, Facebook, AMD). Am I stupid, lucky or both? Yes longest bull run in history, but investing in large tech companies you think are stable long term with good CEOs when you know the field (Apple, Amazon) seems pretty easy. When you read a lot of comments from traders on the east coast they seem like they misunderstand the companies, or are not focused on long term strategic moves. I’m mostly positioned in total market index funds with a couple large positions in companies I think will continue to outperform long term, but it doesn’t seem that hard to do better than traders. Plus the index funds contain a lot of companies I would never personally invest in if they weren’t in the fund, still good to hedge against my own (likely) arrogance.

arkis22 6y ago
If you bought stock in these companies and didn't sell out at any time, do you really think you're competing with traders?
- fossuser 6y ago
  I did sell each of them after while (once I got long term capital gains and needed the money for something else or wanted to move to a different stock). So day traders no, but other traders yes? Particularly the peloton calls (2yr expiration leaps) were an explicit trade against some industry person that was extremely wrong.