6 ms·

The only book you should read is John Bogel's. Do what he says like Goldman partners, Bank of America senior executives, almost every economist does with their

by wbl 6y ago

The only book you should read is John Bogel's. Do what he says like Goldman partners, Bank of America senior executives, almost every economist does with their money and stick it in low cost diversified mutual funds. Or you can learn stochastic calculus and end up in the same place once you realize half of all active traders do worse than the market, before fees.

joshribakoff 6y ago
Buffet sells 5b in options premium a year
- atomicnumber3 6y ago
  I think a big distinction that retail traders need to come to terms with is that, while yes, technically you can make reasonably good sums of money with various trading strategies of various risk profiles, as one person, so many of them are just not worth the trouble. If your passion is this sort of thing, by all means, go ahead. But it's like running a homelab. Yes, you can get pretty decent "savings" (vs running in AWS/DO) but I can guarantee you, you will end up in the basement replugging ethernet cables trying to figure out which one is the bad one while your family and relatives are waiting upstairs, fairly bemused, for you to fix "the internet". It's possible, but as a person with a life, unless it's your passion, I'd recommend just not. Do the financial equivalent of paying DigitalOcean 5 dollars a month: buy sp500 etfs and sit on them.
  - hntrader 6y ago
    I wonder if we can invest in a fund manager who does this strategy. And if it's so good then why do pension funds and endowments not allocate to it typically.
smabie 6y ago
None of the kinds of people you listed are good at trading (esp economists). From experience, professional traders do tend to use passive indices for part of their PA, but also actively trade a portion. But you're right in that if you don't have a passion for it, you'll never be able to truly outperform spy on a risk adjusted basis. However, if you do have the knowledge and the passion, I definitely think you can. Investing is personal, and just holding spy doesn't fulfill everyone's objectives. Here's an example of a strategy that outperforms spy in most cases: 1/3 of your portfolio goes to upro (3x leveraged spy) and 2/3s goes to a bond fund/etf. As long as the bond etf returns above the upro expense ratio (~1%), you will outperform. From my backtests, this strategy will earn you an extra 1-2% return a year, while also having a slightly higher risk adjusted returns. I list the above as a great example because it's the kind of strategy that is great for a PA: easy to manage, doesn't require babysitting, and backed by solid academic research. When people think active vs passive, they think actively trading single stocks vs just holding an index. My point is that you can use some quant-lite strategies that tilt your portfolio to eek out a little return. You don't have to be trading everyday or even holding anything except ETFs.
- eloff 6y ago
  This strategy seems to make a lot of sense to me, so I just checked out the performance of UPRO over the last 5 years versus SPY (^GSPC). UPRO is up 426% (wow) $17.37-$74.01 and ^GSPC is up 192% (talk about a bull run) $1932-$3714 So with UPRO you would have had an average profit of 65.2% per year, and with SPY 18.4% per year. That's even better than x3 returns. Plus you'd have the bond returns. Interesting idea.
  - hntrader 6y ago
    Isn't UPRO just a leveraged SPY. Seems different to the above option selling strategy
    - eloff 6y ago
      You must have skipped over and didn't read the parent post at all. We're not talking about the wheel strategy here.
  - smabie 6y ago
    UPRO is only 1/3 of your portfolio, so you have the same exposure as SPY i.e: you are not going to make those crazy returns. The idea is to get cheap borrowing by using a leverage ETF and then buying bonds such that the bond yield > cost of leverage.
    - eloff 6y ago
      You're arguing against a strawman argument that you invented. I didn't say you would get those crazy returns - merely pointed out that you would have beat the S&P 500 over the last 5 years with the strategy outlined by the parent post. How well it holds up over a time period that also includes bear markets is another question - you can't just look at a bull market and assume it's representative of all time.
  - StrangeDoctor 6y ago
    You absolutely do not want to own upro for 5 years. High fees and more importantly beta-slippage will eat you alive.

by wbl 6y ago

joshribakoff 6y ago

Buffet sells 5b in options premium a year

atomicnumber3 6y ago
I think a big distinction that retail traders need to come to terms with is that, while yes, technically you can make reasonably good sums of money with various trading strategies of various risk profiles, as one person, so many of them are just not worth the trouble. If your passion is this sort of thing, by all means, go ahead. But it's like running a homelab. Yes, you can get pretty decent "savings" (vs running in AWS/DO) but I can guarantee you, you will end up in the basement replugging ethernet cables trying to figure out which one is the bad one while your family and relatives are waiting upstairs, fairly bemused, for you to fix "the internet". It's possible, but as a person with a life, unless it's your passion, I'd recommend just not. Do the financial equivalent of paying DigitalOcean 5 dollars a month: buy sp500 etfs and sit on them.
- hntrader 6y ago
  I wonder if we can invest in a fund manager who does this strategy. And if it's so good then why do pension funds and endowments not allocate to it typically.

smabie 6y ago

None of the kinds of people you listed are good at trading (esp economists). From experience, professional traders do tend to use passive indices for part of their PA, but also actively trade a portion. But you're right in that if you don't have a passion for it, you'll never be able to truly outperform spy on a risk adjusted basis. However, if you do have the knowledge and the passion, I definitely think you can. Investing is personal, and just holding spy doesn't fulfill everyone's objectives. Here's an example of a strategy that outperforms spy in most cases: 1/3 of your portfolio goes to upro (3x leveraged spy) and 2/3s goes to a bond fund/etf. As long as the bond etf returns above the upro expense ratio (~1%), you will outperform. From my backtests, this strategy will earn you an extra 1-2% return a year, while also having a slightly higher risk adjusted returns. I list the above as a great example because it's the kind of strategy that is great for a PA: easy to manage, doesn't require babysitting, and backed by solid academic research. When people think active vs passive, they think actively trading single stocks vs just holding an index. My point is that you can use some quant-lite strategies that tilt your portfolio to eek out a little return. You don't have to be trading everyday or even holding anything except ETFs.

eloff 6y ago
This strategy seems to make a lot of sense to me, so I just checked out the performance of UPRO over the last 5 years versus SPY (^GSPC). UPRO is up 426% (wow) $17.37-$74.01 and ^GSPC is up 192% (talk about a bull run) $1932-$3714 So with UPRO you would have had an average profit of 65.2% per year, and with SPY 18.4% per year. That's even better than x3 returns. Plus you'd have the bond returns. Interesting idea.
- hntrader 6y ago
  Isn't UPRO just a leveraged SPY. Seems different to the above option selling strategy
  - eloff 6y ago
    You must have skipped over and didn't read the parent post at all. We're not talking about the wheel strategy here.
- smabie 6y ago
  UPRO is only 1/3 of your portfolio, so you have the same exposure as SPY i.e: you are not going to make those crazy returns. The idea is to get cheap borrowing by using a leverage ETF and then buying bonds such that the bond yield > cost of leverage.
  - eloff 6y ago
    You're arguing against a strawman argument that you invented. I didn't say you would get those crazy returns - merely pointed out that you would have beat the S&P 500 over the last 5 years with the strategy outlined by the parent post. How well it holds up over a time period that also includes bear markets is another question - you can't just look at a bull market and assume it's representative of all time.
- StrangeDoctor 6y ago
  You absolutely do not want to own upro for 5 years. High fees and more importantly beta-slippage will eat you alive.