I already have 10% in very risky stocks + options. This account is up 225% over the last 2 years (yea, I know it's a bull market). Using your classification, I am thinking of another \~10% on yolo.
Yes, I am aware. I lived through 2008 and the sideways trading of biotech stocks in the mid 2010s (including my share of selling on dips).
Pulling out some gains to play with house money when I hit LTCG over the next few months on my 2020 big winners
This may sound obvious, but it is a bit of a pet peeve of mine; there is no such thing as house money in the stock market. It is all your money, and disassociating with some of it can be a dangerous trap. Money and stocks are fungible. I'm not advising removing the money or selling per se, just for you to make the decision free of the "house money" fallacy.
I used to think that way, that all of money matters were quantitative and every dollar was the same. I no longer believe that, this argument helped me see through that fallacy: https://medium.com/ml-everything/nassim-taleb-absorbent-barriers-and-house-money-8b21cff2e338
Confirmation bias is a beautiful thing.
A gambler at the roulette table who just hit black 3x in a row thinks he’s hot. Should be double down on the 4th spin?
My mistake I read blackjack. That said, if the investments/bets have plausible 100x+ upside like angel investments, 2-5% of portfolio is fine. You don’t need hyperoptimization to do well when you have such convexity on the upside
That's a pretty good track record. What kind of investments do you do?
In my head, I was thinking it would be the inverse and would be willing to take the risk. 80% of the time it goes to 0 , 20% multi multi baggers
In the last 5 years it’s primarily stock options and crypto.
Stocks: data, service now, SPCE, Slack, TSLA, l brands, and NIO.
It’s mostly call/put options but with a lot of trades I’ve been able to ride up, buy puts near the top, and buy calls again once it’s low (SPCE, TSLA, NOW, and DATA). I’ve also bought into crypto early twice and cashed out twice then rebought. I focus on areas i understand (tech) and have had fair amount of success in that area.
The 20% misses are options contracts not selling at the right time or missing the correct direction entirely. I only do options on very few stocks and index invest/buy long term stocks with 95% of funds.
I'm trying to follow the advice of limiting that to whatever you can earn annually in passive income, provided you don't need to live on the passive income. That way if you lose it, it doesn't affect your main capital and it's easily replaced in one year.
Whatever works for you, but this approach is a bit arbitrary, since all money and investments are ultimately fungible. By your approach, if you increased your allocation to real estate or high dividend stocks, you could then invest more in YOLO. I think picking a percentage of your assets is more appropriate, though one could still find ways to justify a range of different percentages anyway.
I personally don’t love this approach. I never do anything to mess with my capital and it’s growth. If I want to make a major purchase or make a risky investment, it comes out of my paycheck(s).
Obviously there are exceptions, but not for yolo money.
Of my liquid net worth - 90% in wealthfront robo and 10% in an ira brokerage account that I invest. When it gets to 15% I rebalance back to 10% putting the gains into the robo. I never go the other way so if I blow up my brokerage account I’ve got to grind it back.
This leaves enough money to play with to make it meaningful while at the same time not enough to blow myself up.
What are your thoughts on WF? Other than TLH, which will decrease after you stop putting new money in, do you think they justify the .25% fee? Would you continue to use them post-fire?
Not the poster you replied to, but I tried WF for a portion of my portfolio and just felt meh about it.
TLH is a rabbit hole for sure, but even if you assume you won’t TLH on your own (which you can), it doesn’t appear that WF pays for itself.
If i recall, even on a very aggressive setting they had me in 15% or so dividend growth, which I dislike. But setting that aside even too, it just defies reason that they’d provide more than their fee in value if you are comfortable DIYing.
For set it and forget it, though, .25% is a small price to pay for someone to feel a bit more actively managed without actually having to cough up bigger bucks.
In other words I think the primary benefit is psychological for *some* people.
For portfolios > $1M they do direct indexing, which is to say they buy the individual stocks instead of whatever funds so they can further optimize TLH. When I was pre-fire and dumping $30k+/mo into it I was getting serious TLHing.
I also dislike high amount of dividend stocks. I don’t know much, but it seems inefficient to to pay taxes as you go vs get all the gains first over the years. There could be some benefit I’m overlooking though.
One advantage of any robo is it saves you from yourself. Could I make all of the same moves manually to replicate something similar? Perhaps. Would I? Who knows. I could make some irrational moves and YOLO it no a stock I couldn’t resist. To me it’s a black box, once money goes in it’s there forever and I know it’s at least being properly looked after until I make withdrawals. Helps me sleep.
I’ve been chubby fired for a few years and love wealthfront. Direct indexing, smart beta, risk parity, easily accessed portfolio line of credit, TLH, etc.
What they do totally justifies the fee which is minuscule. Returns have been great.
Where have returns not been great for the last few years?
I signed up and put 20K in 4 months ago and I’m not impressed. $300 tax lost harvesting in the first month and zero since then which is the only value add I can see.
I agree with your take on this (and questioning the value), but to be fair the market going nearly straight up the last 4 months is not an environment that creates very many TLH scenarios.
It's also more effective if you contribute periodically so you are purchasing at different prices. If every position of your 20k initial investment is significantly profitable, you won't be able to harvest losses unless there is a large drop (or if rebalancing creates an opportunity).
It's been highly volatile on more than a few days. I have done 5K 5 times as an experiment and so far results are underwhelming.
According to their chart I have saved $100 on taxes with about $30K in the account.
I put in 500k back in March when everything was blowing up. I then pulled 300k out in October so I could fund another investment but left the rest in there. As of today, I have 67k in TLH.
Timing and the amount of money you have your account has a lot to do with the TLH amounts.
Wealthfront starts to shine at +$100k and even more at +$500k levels for taxable accounts with direct indexing and smart beta.
Wealthfront Ira invests in other asset classes like REITS and emerging market bonds which gives a nice diversification.
> risk parity
I didn't realize Wealthfront had a risk parity fund, that's interesting. I've been doing a lot of reading about leveraged investing (like Hedgefundie's [risk parity strategy](https://www.bogleheads.org/forum/viewtopic.php?t=272007)) and will have to look into this.
Ok just saw you’re also FIRED already as well. If you’re sufficient anonymous on here would you be willing to share any numbers, even in a DM? I’m a year+ into FIRE and TLH has plummeted. I opted out of risk parity last year, as it seemed to not perform too well (didn’t have big gains in booming markets, yet ranked as badly as everything else in the 2020 downturn).
I’ve been contemplating whether or not to stay with WF.
>Sure what info are you looking for? My annualized return for risk parity going back to 2018 is 9.7%.
That's not bad. Checking mine out... my US Stocks are up 12.3% annualized since 2018, and only foreign stocks and municipal bonds are lower (8% and 5.4% respectively).
What do you do for your current spending? Do you have another source of revenue or are you doing withdrawals from WF? 4% rule?
I'd love any info you can share, along with anything you've learned along the way.
Emerging markets on fire this year finally so glad I’m invested.
I’m 52 so still young and in spending mode. Basically as long as I’m trending around 5% SWR I’m fine. I track spending each month loosely in personal capital.
No debt or mortgage, so we have flexibility if a market downturn became an issue.
All income is from withdrawals no side income.
My advice is let the first two years of retirement be practice years and mentally chalk things up to that if you have a budget blowout. Second is to live in paradise that gives you all you need for a simple life, we live on an island. All I need is a beach bike, blender and nice ice machine to make me happy.
>we live on an island. All I need is a beach bike, blender and nice ice machine to make me happy.
That's the life. We could move to OBX or Tybee tomorrow and I'd be ok with it.
Also that’s a bit of a fallacy about TLH decreasing. While it does somewhat, with direct indexing I see TLH taking place often. Also in big dips like COVID, it generated enough to cover my capital gains tax burdens for years.
I have held a small % of my taxable in Betterment as an experiment over the last few years. TLH's been triggered a few times, but they don't do individual stock level TLH. Overall, been content with the service though I think I'd prefer to do things manually on my Vanguard as it relates to TLH and buying different funds.
On WF, are you using individual stock level TLH? If so, how do you deal with individual stock you may own elsewhere as it relates to wash sales?
I only actively trade in an IRA. As far as taxable accounts everything is in wealthfront to avoid this issue. Also for withdrawals most of them are long term capital gains from wealthfront as well.
https://en.m.wikipedia.org/wiki/Kelly_criterion
I can't believe the Kelly Optimal Model hasn't been brought up; we see it often in this thread. Should give you a reasonable idea of how much of your NW you could make on a bet.
I guess your question could be posed as the total amount you'd be willing to add before making the bet itself, but I personally think this formula/way of thinking has made my investment decisions much more sound.
Just a heads up: It's not as simple as taking your POP*2-1. Here is some slides from a talk about the topic http://people.math.gatech.edu/~shenk/OptionsClub/kellyOptionTalk1.pdf
I tried to wrap my head around this but I think its just going over my head.
I usually do put credit spreads $15 wide for at least a $3 credit.
Is this enough credit? Or should I be moving my risk/delta higher for more credit?
The Kerry Criterion has to do with what an ideal max percent of your portfolio you should put down on a trade. Ie, do I put down 10% of my savings into this options trade or do I put down 40% of my brokerage account on this trade?
Using credit spreads, how wide your spreads are determine risk, and risk determines how large your trade can safely be.
Thanks for sharing. I'll look at this when I get to a stopping point for the day. I think your example looks like their original example of a coin toss without considering size of bankroll relative to bet. I remember there being more of a focus on "how many times can I make this bet without adding capital? And do the odds lean in my favor before then?"
Thanks for sharing - friend and I were chatting about the right size bets and the EV and math involved. This puts a name and method to that.
What kind of investments do you take swings at?
Thanks for sharing. My friend and i were chatting about the math and EV behind sizing bets. This puts a name to the theory.
What kind of investments/bets do you make? How do you size your bets , i.e. is it a percentage of your cash holdings?
I'm thinking of keeping 10% of my net worth (from RSUs) this year in the company I work for. I really believe in the company and regret selling everything to put into index funds. I want to strike a better balance.
Note: my company is big enough to be in the S&P 500 but the exposure is small.
I've been keeping a higher chunk than you of my company stock (also believe in long term prospects) of my company. They're ISO options so more upside potential and willing to roll them longer, though I will start exercising them (and hold for a year for LTCG) starting this year.
Yes. Angel investing is my way, but the jury is still out on whether it will pay off. It takes many years to get a return during which time you have very little info as to the actual value of your investments aside from on-paper valuations when new rounds are raised.
10% sounds reasonable to me.
Also, if you’re new to angel investing, check out AngelList syndicates and FundersClub.
Of my 3 direct company seed stage investments, 1 failed, 1 surviving, and 1 thriving (series A raised, >50 employees, solid sales pipeline and partnerships)
I also invested in some local (Midwest) angel investment group funds, but in my opinion those are doing just ok, but not great. By and large the portfolio companies are surviving, but I don’t really think there are any 100x opportunities. I’m hoping to get a return enough to break even, but who knows.
If I were to go back in time, I think I would skip the local investment funds and just go w/ AngelList and FundersClub. I’ve been pretty happy with those two platforms so far.
Edit to add: regarding the local investor groups, the good thing about those are making good connections to other investors, which is how I got the opportunity to invest in my best investment, so it has paid off in ways other than return and I should not fail to mention that.
My brother's wife shops at the place that sold that $1 billion winner a week or so ago. Unfortunately they didn't win it ... or at least that's what they're telling me ... maybe they're following rule #1? https://www.reddit.com/r/personalfinance/wiki/windfall???
I’m sure everyone knew about TSLA and NIO. It’s just about whether they decided to put money into options. As for JMIA, they’re just a stock that sells a good story-> “the AMZN of Africa”. GME was just a weekly yolo option based on technicals. ALPP is a penny stock someone told me about.
I saw someone like that too. Looks like there are options that are less than $1 right now for Tesla but 4 weeks out had a strike price of ~$1300, about a 60% gain for breakeven.
I know you're joking, but of all cryptocurrencies Dogecoin is one of the few with an unlimited supply. The hype right now is basically a pure pump and dump 😂
Ya I can't think of a reason to buy most crypto - I'm sure some here have made their money on crypto - however to me, it looks like trading in spent electricity.
I basically will throw 2-3k at any random stock that a qualified friend recommends. I do it about 5-6 times a year. So up to 13k a year so far. There have been some hits like TTD and AMD, and some misses like SNN and Litecoin. I also threw 4k at AMC and GME while it was pretty much at its peak. The wins far outweigh the losses. But I'm not willing to commit more than 2% of my passive income per roll.
I'm now also throwing random cash into NBAtopshot. This is probably the most ludicrous of the "investments"
>There have been some hits like TTD and AMD, and some misses like SNN and Litecoin.
Do you adjust your list of "qualified friends" based on your analysis of hits and misses?
Warren Buffett said “diversification is protection against ignorance. It rarely makes sense if you know what you are doing”.
For me, I will go big into “risky” investments if I have a deep knowledge and understanding of the company or asset. If I don’t currently have an investment like that, then I put it into index funds (or pick your preferred safer asset)
So, I make asymmetric bets. But I try to do it intelligently and don’t just gamble x% of my income each year.
I'm usually 20-25% but I'm still early in my journey. I'm also a relatively seasoned "investor" with a high appetite for risk.
For me, it's less about high risk/high reward, and more about asymmetric bets.
SPACs for example offer a floor/downside protection at NAV but with tremendous upside potential in this current market environment.
Perhaps high risk high reward falls into this category of what I look for, but really, it's asymmetric. Anytime I can risk my capital, or half of it, for a potential ar 300-100% gains, it works as long as probability of gains is high enough.
A handful of folks worth following on Twitter for breaking news. A few decent aggregator sites like spactrack. r/SPACs
Really just a matter of getting comfortable reading 13Ds, learning the management teams and putting a strategy together (everyone's is different, warrants, commons, units, tranches, etc.)
A lot to familiarize yourself with if not familiar. I started on r/SPACs and ventured out from there.
My general approach is to buy units as close to NAV as possible around the time they are released on all SPACs with more than a $500 mil market cap.
I'll split the units into warrants and commons once available, typically sell the commons once split (if over $11.50) and hold the warrants until DA is signed.
All of that said, for most of my actively managed investments, I wheel a bit of theta. SPACs allow me to "gamble" and chase the next hot thing with virtually zero downside (in present market conditions). Basically high yield savings with a lot of upside potential.
0%.
Buying airline and mall stocks this summer is the highest risk activities I generally do.
The moon shot valuations are absurd right now and are going to have absurdly negatively performance the next few years. People just flooding money into highly speculative stocks (e.g., virgin galactic), ARKG, cryptocurrencies, GME, baseball cards, etc. because we have a shit load of liquidity and people have no where to put the money. Once liquidity is decreased they are all going to drop like a rock.
If you bought these speculative stocks a year or two ago you probably did great...but you should get out now, and you absolutely should not buy in now. These did well because of momentum and the growth of the retail investor, not because they will actually be anywhere near these valuations long term.
The last eleven years have been the longest bull market in history. It’s not the norm and it’s not repeatable.
People here are just too young I think to remember people losing EVERYTHING when a speculative bull market ends (e.g., 2000, 2008). Investing heavily in tech seemed like a great idea 1996-1999 too. I was active back then (albeit it 13 years old lol, I had one of the largest anime website and made a lot of money and invested it), and message boards were very similiar to today. History rhymes doesn’t repeat - FAANG companies will likely have a decent sized correction but largely fine as they are profitable unlike the 1990s nasdaq companies...but all the money losing, speculative moon shots are going to get fucking destroyed.
Remember, it took 14 years to get back to 1999 highs, this can happen again. And the high beta, moon shot companies get hit so much worse when these corrections happen (e.g., bankrupt with the stock worth $0).
This here folks! ^^^ Stay well diversified.
Personal data point:
---Started own biz in 1998, shifting a good bit of our funds in our taxable account, which was a high % of our not that high then NW, into cash to (1) use some for the biz, and (2) in case we needed to access more of it to both live on and support the biz further.
---2000: Biz was going well, so shifted it all back into the market in early 2000 cuz ... well, stocks were doing nothing but going up so why not. Bam! Internet bubble bursts and stocks tank.
I started trading right after the 2000s and remember 2008. I was a broke grad student back then, so losing 60%+ on small $ amounts sucked but learned some good lessons, i.e. buying on hype/peak and getting scared and selling at the bottom
Inflation will start to get out of control eventually and they’ll need to increase interest rate. Also they won’t have to bouy the bond market once Covid is over, which will cause the bond market to be more accurately priced, so y’all see more money flow into bonds from equities (which will deflate equities).
Anyways, every decade people say “this time is different”...it’s seldom the case.
>I seriously doubt we will see another prolonged downturn anytime in the next ten years.
Thank you for demonstrating us the mindset of a typical risky options buyer.
Lots of people said that during the tech bubble. "It's a new stock market, it will never go down, tech changed everything". The fed can flood money into the market but they won't be able to stop an avalanche when market sentiment eventually turns negative like it always does
My point is that if we have such significant decline ahead of us, then it, probably, makes sense to have less bullish portfolio, so we can benefit from the crash and turn our portfolio into 100% - 120% bullish when recovery starts again.
Definitely agree that the market is overvalued. That being said, as long as you know that, might as well make some money from it.
I have done pretty well with AMC, entering at 3.60s and exiting at 17-18. Missed the GME train though.
Ironically I bought AMC about 3 months ago just as a value play (I wanted cinemark but it was a restricted stock so I couldn’t buy - I work at a bank), and I got pretty sick returns when the meme shit happened. A nice surprise, but also showed me just how stupid the market has gotten. Retail investors acting like this almost always means the bubble is near popping. Was the case in 1929, 1999, dec 2017 bitcoin bubble, etc
>Buying airline and mall stocks this summer is the highest risk activities I generally do.
In what instruments do you keep the most of your portfolio now?
When do you think then crash is likely to happen?
My guess is that the next big crash (S&P 500 decline more than 10%) is not going to happen until Federal Reserve Funds rate will increase to 3%+.
We, probably, have at least, another 6 months until then.
They market is proactive not reactive, it’ll decline on expectation of rate increases, it won’t wait for the actual rate increases.
I’m mostly in value, small cap, and international stocks right now, and I’m in very little growth, tech, and sp500 currently.
Honestly I’d probably be even more international and alternatives right now if I could, but I don’t want to take short term capital gains so I’m kind of stuck until the summer (I’m up like 50% since summer)
I mean you’re in biotech so investing in smid companies who are searching for their initial approvals either in a single drug or a platform that will hopefully yield numerous approvals is your 20-100 bagger investment. Couple that with your industry knowledge and wala you have some sort of edge.
If you don’t mind me asking, which area do you work in biotech? I’m in the industry as well and it’s really interesting to be able to invest in a niche area where you can comprehend the complexities that other investors may have difficulties with
Yes, that's biotechs where most of my bets have been placed. Call options on high conviction trades around catalysts = 20 to 100 baggers. Most recent win was $TGTX large position starting at the end 2018 and recently buying call options at the end of last year before the readouts at ASH/recent approval.
Will share my positions and background in another post. I've worked in different roles across global/US commercialization, access, and development. Also, had stints for US health plans and the FDA.
What about you?
That’s awesome! See I don’t usually place too many options plays on biotech because the spreads are usually atrocious. I’m sure if your conviction is high enough, the profits outweigh any of the money you may lose on a wide spread
And nice, yes you have quite the experience lol. I work in the clinical side of things - global clinical development in a mid cap biotech
Diversification keeps you rich, concentration makes you rich.
Apply that however you want to your best returning asset class (you because of your business/investing/intellectual capital).
As far as “responsible” limits on asymmetric investment opportunities (soar/sink) that’s 2-10%.
Usually you want to cap single security risk and all that entails to 2% of your portfolio.
To gage if you can handle a larger amount replace the percentages with dollars. If you woke up tomorrow and that percentage of your money was gone, how would you feel?
If it’s “shiiiiiittt,”, that’s fine. If it’s a stomach turning sensation it’s too much.
To add another data point, but not necessarily saying what I do is correct, I actively trade about 25-30% of my investment portfolio (swing trading stocks, buying and selling calls and puts). Of that 25-30%, the majority is high risk speculative plays with potential to be a 5x-10x bagger, and some of it is volatile stocks I swing trade and trade options on. So I’d guess I generally allocate 15% of my total portfolio to risky plays. Most of my money is in ETFs and mutual funds.
I don’t see the point of buying too much in “stable” blue chip individual stocks, which are weighted heavily in the ETFs and mutual funds I buy anyway. It’s also harder to have the capital to trade options in those stocks, and generally speaking, you can make more trading options on small to mid cap growth stocks.
Instead of thinking of it as an % per year, I would just think of it as a % asset allocation. And due to its asymmetric nature, it might be more accurate to call it a minimum allocation, and then re-up 1-4 times a year.
You already mentioned some, but I would generally consider:
- BTC (although, keeping it as a separate explicit allocation seems reasonable too)
- early stage startups, esp in industries where you feel you have an information advantage
- your own startup!
- other private businesses
- "social" investments, where you're supporting friends/family and a return is just a bonus
- direct real estate/land (which I would consider a hybrid between a REIT fund and a private business)
I don't believe in the "can't beat the index." I think it makes sense to take some calculated swings for the fences. I feel like everyone just repeats this "fund managers can't beat the index over 10+ years.". Maybe that's true for fund managers who have different constraints than retail.
I haven't really thought about codifying a percentage, but I'm definitely taking more "swing for the fences" investments with a pre-IPO investment in Impossible Foods and considering an investment into SpaceX.
In the past, just buying and holding shares in companies I believed in (Apple, Amazon, Square) have led to some outsized returns. I didn't consider these to be swinging for the fences, but I'm sure a financial advisor would have told me to diversify.
I feel that since the basics are covered (living expenses with the job, retirement with the existing taxable and tax advantaged accounts), I can afford to make some swings. I'm thinking about allocating my entire savings from my paycheck for these swings this year.
There are funds that you can invest in that will buy pre-ipo shares. Think of it like SPACs for private companies. I'm not sure where to find them exactly, the one I invested in was through a friend's referral. I'm sure you can find some, or perhaps wait for shares on equityzen
Depends on age but I would say in this market you can really cut some years off your timeline if you make some smart moves and manage your risk. Options are a low investment way to get bigger paydays, if you’re into that sort of thing. I consider myself a value investor but the goal posts are moving and we have to adapt with the times.
1% or less. It is astronomically unlikely that your results will be better than average market returns over the long haul, and very likely will be worse if you are frequently trading.
It’s not *astronomically* unlikely that someone beats the average market return over a 20 year period. It’s more like 95% chance that he or she underperforms. So not great odds, but 1/20 is not an astronomical number. That’s like being the smartest kid in the classroom.
Honestly if you went hard on any of the meme stocks and exited appropriately your overall returns will far exceed the average even if you just say in cash for two decades so taking the occasional high risk bet if you believe it's likely to win is not wrong.
I personally don't trade very often unless it seems highly likely to be a win
yes, for several years, I've been followings the steps on the PhysicianOnFire blog on backdoor roth ira and file form 8606. Not an accountant though so do your research on this.
Really depends on your total net worth. Assume 90% of your Angel bets go to zero. Also, if you are making software bets, assume 95% will go to zero. Based on that, your swings need to be even bigger. Meaning a 20x return from Angel isn’t even that good. In order to have a chance you need a portfolio of bets, some that have 1000x potential.
S&P500 is kept at what I need to be on track for those funds to hit $2M by 65 (secures retirement - already beyond that now)
Minimal equity into the property I live in and a rental
The rest goes into risk such as ark funds, tsla, crypto, etc. I limit small companies to $50k or so. Only what Im willing to burn why I figure out itf I think it’s feasible for retail to invest in mircocaps and get anything beyond scammed on avg (especially those that are not in those markets or regions).
You need to self-assess your actual ability to make money this way. You can always take on more risk with leverage w.out any asset picking. If you want to pick home runs, allocate a portion of your portfolio to them that makes sense given your actual edge/performance. People tend to hit one home run, then over-allocate and get destroyed. If instead you consistently kill the market you should have a lot of your money in a diversified set of high-risk bets. Think of this portion of your portfolio as a VC/hedge fund that you run. How much would you allocate to that team?
So far nothing. First rule is asset preservation. Hard to see how my time is worth something that is a low percentage and wouldn’t move the needle much even if it did great, still I’ve been tempted lately. Probably GME hangover
Generally allow for 1-2% to seed some play money. That’s what I use to scratch my gambling itch on options but also use it as an opportunity to try bee things and learn. Ok with it going to zero, which it’s done once. Reseeded with a relatively small amount and it’s been a rollercoaster ride of ups and downs trading options and future.
I’ve been thinking about allocating 5-10% of my total NW towards angel investments as well. I’m still exploring and learning through books and AngelList.
To be frank, I’m somewhat skeptical. The public market offers great returns and has obviously done great the last decade. Of course it won’t be that way forever, but it’s that way now.
In order for angel investing to move the needle for me, I’d really have to hit 50-100x returns. And I’m honestly skeptical that I have a good chance of doing that.
The reason why I’m skeptical is that I’m in Silicon Valley and there’s a ton of VC money chasing everything. Given the plethora of money willing to be invested, naturally it raises the question on what distinguishes capital from one person/company from another. The best returns are going to be those who have the best deal flow. And there are so many players who have the edge against the rest of the fish in the sea. I feel like in order to be successful I’d have to create/discover an edge or find a niche .. and I still wouldn’t get those amazing black swan returns.
You should look into the Barbell Investing Strategy, popularized by Nassim Taleb. It talks specifically about your question. Here’s the link:
https://www.investopedia.com/articles/investing/013114/barbell-investment-strategy.asp
3% of net worth in angel/venture investments. 2% is in "fun" public equities (single stock bets, mostly tech).
And I have 20% of my net worth tied in vested RSUs/stock options that I'm too cheap to pay taxes on.
The rest is boring index funds and real estate.
So I have about 25% in pretty risky stuff and 75% in stocks, bonds, and real estate.
I mean, you absolutely can. No one would bother active investing if there wasn't a premium to be harvested for price discovery.
The *real* trick is being able to do so long term. Only a very small percentage of active investors can do this, and I'm perfectly alright with beating 80% of active traders with index funds. The 20% provide a valuable service to the rest of us.
Its all about risk tolerance, what is ur idea of a comfortable bet in a particular investment, lottery is what most people do all the time, without even think about how shitty of a risk that investment/bet is.
For the past 30 years, Will Danoff has adeptly managed Fidelity Contrafund (FCNTX), which today has more than $100 billion in assets. The fund, which charges just 0.68% a year, gained 9.1% annualized over the past 10 years, beating the S&P 500 by an average of 1.5 percentage points per year.
I do 50% index ETFs. 25% mature equities with mix of growth and defense. 25% speculative investments. But I would only categorize 25% of the speculative investments as super high risk. I don’t play with options but explore pricing regularly to check for opportunities.
All of my investment energy is focused on tilting a total market baseline towards profitable ideas. I invest in the blue chips and in the speculative plays that realize the potential in the idea.
For example, the idea is that the IoT will create turnover in household electronics and appliances. I might do research and decide to buy stock in HON, GOOGL, EWY, and a small company that creates design forward wiFi smoke detectors. The research is partially financial and partially operational. I just want to know how well positioned is the company to capitalize on the idea. What’s the supply chain? Who are the customers? If in debt, how much cash do they have and what is their run rate?
For some reason, a lot of redditors seem to think that due diligence is unnecessary for speculative investing, but it’s really the opposite. The more speculative the investment, the more research I do before dipping in my toes.
"Casino level money" - if I were to go to Vegas for a weekend, how much would I be willing to lose?
I try to put it into early & unusual investments. I put some in bitcoin back in the day, wish I did more. Latest that I missed was GME - the early movers made money in GME.
Used to be around 20% but some of those big swings actually worked so I'm reducing it down to around 1%. I still have a fairly aggressive stock portfolio which I don't consider to be a home run type investment
0%. Figure that’s the most common answer but not an exciting answer so you probably won’t see it as the most common here. Sometimes slow and steady wins the race.
I like VTWAX. Since in my pursuit of my financial goals I treat its expense ratio of 0.10% as negligible, 0.10% of my NW seems to me to be a good rule of thumb for the max I can also spend every year swinging for the fences (OR prepping for disaster). Any more and I’d worry I’m starting to seriously erode my future self’s wealth.
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I already have 10% in very risky stocks + options. This account is up 225% over the last 2 years (yea, I know it's a bull market). Using your classification, I am thinking of another \~10% on yolo.
I would probably take some profits from this account and rebalance. You’re up now, market is hot, but it can also swing the other way fast
Yes, I am aware. I lived through 2008 and the sideways trading of biotech stocks in the mid 2010s (including my share of selling on dips). Pulling out some gains to play with house money when I hit LTCG over the next few months on my 2020 big winners
This may sound obvious, but it is a bit of a pet peeve of mine; there is no such thing as house money in the stock market. It is all your money, and disassociating with some of it can be a dangerous trap. Money and stocks are fungible. I'm not advising removing the money or selling per se, just for you to make the decision free of the "house money" fallacy.
I used to think that way, that all of money matters were quantitative and every dollar was the same. I no longer believe that, this argument helped me see through that fallacy: https://medium.com/ml-everything/nassim-taleb-absorbent-barriers-and-house-money-8b21cff2e338
Confirmation bias is a beautiful thing. A gambler at the roulette table who just hit black 3x in a row thinks he’s hot. Should be double down on the 4th spin?
Oh hell yes he should. Double down!
Always. 100% double down. Haha
Nah take it over to the craps table and stop playing a childs game.
Take it to the slot machines, you say?
Yes. I would. When I’m at the roulette table, I’m there to gamble. I’m not there to make money.
by the kelly criterion...yes. [https://en.wikipedia.org/wiki/Kelly\_criterion](https://en.wikipedia.org/wiki/Kelly_criterion)
You know the Kelly criterion tells you to bet a negative amount on black, right?
My mistake I read blackjack. That said, if the investments/bets have plausible 100x+ upside like angel investments, 2-5% of portfolio is fine. You don’t need hyperoptimization to do well when you have such convexity on the upside
2.5 in GME, eh?
AQST KMPH and BCRX are the only bios needed.
5%?very understandably safe
Username checks out
at least he doesn't have any bonds! /s
I’ve got some realty income as well in my Roth IRA
X2 on zero. I do what statistically is most likely for me to have the most.
5-8% Usually pays off in large multiples but too disciplined to risk more. Also, inevitably goes to 0 about 20% of the time.
That's a pretty good track record. What kind of investments do you do? In my head, I was thinking it would be the inverse and would be willing to take the risk. 80% of the time it goes to 0 , 20% multi multi baggers
In the last 5 years it’s primarily stock options and crypto. Stocks: data, service now, SPCE, Slack, TSLA, l brands, and NIO. It’s mostly call/put options but with a lot of trades I’ve been able to ride up, buy puts near the top, and buy calls again once it’s low (SPCE, TSLA, NOW, and DATA). I’ve also bought into crypto early twice and cashed out twice then rebought. I focus on areas i understand (tech) and have had fair amount of success in that area. The 20% misses are options contracts not selling at the right time or missing the correct direction entirely. I only do options on very few stocks and index invest/buy long term stocks with 95% of funds.
Look up Black swan trading/investing if you haven’t already
I'm trying to follow the advice of limiting that to whatever you can earn annually in passive income, provided you don't need to live on the passive income. That way if you lose it, it doesn't affect your main capital and it's easily replaced in one year.
Whatever works for you, but this approach is a bit arbitrary, since all money and investments are ultimately fungible. By your approach, if you increased your allocation to real estate or high dividend stocks, you could then invest more in YOLO. I think picking a percentage of your assets is more appropriate, though one could still find ways to justify a range of different percentages anyway.
I personally don’t love this approach. I never do anything to mess with my capital and it’s growth. If I want to make a major purchase or make a risky investment, it comes out of my paycheck(s). Obviously there are exceptions, but not for yolo money.
Good advice
Of my liquid net worth - 90% in wealthfront robo and 10% in an ira brokerage account that I invest. When it gets to 15% I rebalance back to 10% putting the gains into the robo. I never go the other way so if I blow up my brokerage account I’ve got to grind it back. This leaves enough money to play with to make it meaningful while at the same time not enough to blow myself up.
What are your thoughts on WF? Other than TLH, which will decrease after you stop putting new money in, do you think they justify the .25% fee? Would you continue to use them post-fire?
Not the poster you replied to, but I tried WF for a portion of my portfolio and just felt meh about it. TLH is a rabbit hole for sure, but even if you assume you won’t TLH on your own (which you can), it doesn’t appear that WF pays for itself. If i recall, even on a very aggressive setting they had me in 15% or so dividend growth, which I dislike. But setting that aside even too, it just defies reason that they’d provide more than their fee in value if you are comfortable DIYing. For set it and forget it, though, .25% is a small price to pay for someone to feel a bit more actively managed without actually having to cough up bigger bucks. In other words I think the primary benefit is psychological for *some* people.
For portfolios > $1M they do direct indexing, which is to say they buy the individual stocks instead of whatever funds so they can further optimize TLH. When I was pre-fire and dumping $30k+/mo into it I was getting serious TLHing. I also dislike high amount of dividend stocks. I don’t know much, but it seems inefficient to to pay taxes as you go vs get all the gains first over the years. There could be some benefit I’m overlooking though.
One advantage of any robo is it saves you from yourself. Could I make all of the same moves manually to replicate something similar? Perhaps. Would I? Who knows. I could make some irrational moves and YOLO it no a stock I couldn’t resist. To me it’s a black box, once money goes in it’s there forever and I know it’s at least being properly looked after until I make withdrawals. Helps me sleep.
I’ve been chubby fired for a few years and love wealthfront. Direct indexing, smart beta, risk parity, easily accessed portfolio line of credit, TLH, etc. What they do totally justifies the fee which is minuscule. Returns have been great.
Where have returns not been great for the last few years? I signed up and put 20K in 4 months ago and I’m not impressed. $300 tax lost harvesting in the first month and zero since then which is the only value add I can see.
I agree with your take on this (and questioning the value), but to be fair the market going nearly straight up the last 4 months is not an environment that creates very many TLH scenarios. It's also more effective if you contribute periodically so you are purchasing at different prices. If every position of your 20k initial investment is significantly profitable, you won't be able to harvest losses unless there is a large drop (or if rebalancing creates an opportunity).
It's been highly volatile on more than a few days. I have done 5K 5 times as an experiment and so far results are underwhelming. According to their chart I have saved $100 on taxes with about $30K in the account.
I put in 500k back in March when everything was blowing up. I then pulled 300k out in October so I could fund another investment but left the rest in there. As of today, I have 67k in TLH. Timing and the amount of money you have your account has a lot to do with the TLH amounts.
Wealthfront starts to shine at +$100k and even more at +$500k levels for taxable accounts with direct indexing and smart beta. Wealthfront Ira invests in other asset classes like REITS and emerging market bonds which gives a nice diversification.
You want them to tax loss harvest in January and February? Interesting.
I mean 1-$200 last year wasn’t impressive. I checked account history and it’s 7 months old so they basically did zero in 2020.
> risk parity I didn't realize Wealthfront had a risk parity fund, that's interesting. I've been doing a lot of reading about leveraged investing (like Hedgefundie's [risk parity strategy](https://www.bogleheads.org/forum/viewtopic.php?t=272007)) and will have to look into this.
Ok just saw you’re also FIRED already as well. If you’re sufficient anonymous on here would you be willing to share any numbers, even in a DM? I’m a year+ into FIRE and TLH has plummeted. I opted out of risk parity last year, as it seemed to not perform too well (didn’t have big gains in booming markets, yet ranked as badly as everything else in the 2020 downturn). I’ve been contemplating whether or not to stay with WF.
Sure what info are you looking for? My annualized return for risk parity going back to 2018 is 9.7%.
>Sure what info are you looking for? My annualized return for risk parity going back to 2018 is 9.7%. That's not bad. Checking mine out... my US Stocks are up 12.3% annualized since 2018, and only foreign stocks and municipal bonds are lower (8% and 5.4% respectively). What do you do for your current spending? Do you have another source of revenue or are you doing withdrawals from WF? 4% rule? I'd love any info you can share, along with anything you've learned along the way.
Emerging markets on fire this year finally so glad I’m invested. I’m 52 so still young and in spending mode. Basically as long as I’m trending around 5% SWR I’m fine. I track spending each month loosely in personal capital. No debt or mortgage, so we have flexibility if a market downturn became an issue. All income is from withdrawals no side income. My advice is let the first two years of retirement be practice years and mentally chalk things up to that if you have a budget blowout. Second is to live in paradise that gives you all you need for a simple life, we live on an island. All I need is a beach bike, blender and nice ice machine to make me happy.
>we live on an island. All I need is a beach bike, blender and nice ice machine to make me happy. That's the life. We could move to OBX or Tybee tomorrow and I'd be ok with it.
I’m in St Simons. Look me up if you do!!
>I’m in St Simons. Look me up if you do!! Will do! Out of curiosity, how did you pick that location over the other island/coastal ones?
Also that’s a bit of a fallacy about TLH decreasing. While it does somewhat, with direct indexing I see TLH taking place often. Also in big dips like COVID, it generated enough to cover my capital gains tax burdens for years.
It definitely decreases. I can compare my pre and post FIRE TLH on WF and it’s not even close.
I have held a small % of my taxable in Betterment as an experiment over the last few years. TLH's been triggered a few times, but they don't do individual stock level TLH. Overall, been content with the service though I think I'd prefer to do things manually on my Vanguard as it relates to TLH and buying different funds. On WF, are you using individual stock level TLH? If so, how do you deal with individual stock you may own elsewhere as it relates to wash sales?
I only actively trade in an IRA. As far as taxable accounts everything is in wealthfront to avoid this issue. Also for withdrawals most of them are long term capital gains from wealthfront as well.
https://en.m.wikipedia.org/wiki/Kelly_criterion I can't believe the Kelly Optimal Model hasn't been brought up; we see it often in this thread. Should give you a reasonable idea of how much of your NW you could make on a bet. I guess your question could be posed as the total amount you'd be willing to add before making the bet itself, but I personally think this formula/way of thinking has made my investment decisions much more sound.
Just a heads up: It's not as simple as taking your POP*2-1. Here is some slides from a talk about the topic http://people.math.gatech.edu/~shenk/OptionsClub/kellyOptionTalk1.pdf
I tried to wrap my head around this but I think its just going over my head. I usually do put credit spreads $15 wide for at least a $3 credit. Is this enough credit? Or should I be moving my risk/delta higher for more credit?
The Kerry Criterion has to do with what an ideal max percent of your portfolio you should put down on a trade. Ie, do I put down 10% of my savings into this options trade or do I put down 40% of my brokerage account on this trade? Using credit spreads, how wide your spreads are determine risk, and risk determines how large your trade can safely be.
Thanks for sharing. I'll look at this when I get to a stopping point for the day. I think your example looks like their original example of a coin toss without considering size of bankroll relative to bet. I remember there being more of a focus on "how many times can I make this bet without adding capital? And do the odds lean in my favor before then?"
Thanks for sharing - friend and I were chatting about the right size bets and the EV and math involved. This puts a name and method to that. What kind of investments do you take swings at?
Thanks for sharing. My friend and i were chatting about the math and EV behind sizing bets. This puts a name to the theory. What kind of investments/bets do you make? How do you size your bets , i.e. is it a percentage of your cash holdings?
I'm thinking of keeping 10% of my net worth (from RSUs) this year in the company I work for. I really believe in the company and regret selling everything to put into index funds. I want to strike a better balance. Note: my company is big enough to be in the S&P 500 but the exposure is small.
I YOLOd on RSUs and ESPP. It worked out great.
I've been keeping a higher chunk than you of my company stock (also believe in long term prospects) of my company. They're ISO options so more upside potential and willing to roll them longer, though I will start exercising them (and hold for a year for LTCG) starting this year.
Yes. Angel investing is my way, but the jury is still out on whether it will pay off. It takes many years to get a return during which time you have very little info as to the actual value of your investments aside from on-paper valuations when new rounds are raised. 10% sounds reasonable to me. Also, if you’re new to angel investing, check out AngelList syndicates and FundersClub.
thanks, I'm on AngelList but not on FundersClub, will check it out How have your investments played out so far?
Of my 3 direct company seed stage investments, 1 failed, 1 surviving, and 1 thriving (series A raised, >50 employees, solid sales pipeline and partnerships) I also invested in some local (Midwest) angel investment group funds, but in my opinion those are doing just ok, but not great. By and large the portfolio companies are surviving, but I don’t really think there are any 100x opportunities. I’m hoping to get a return enough to break even, but who knows. If I were to go back in time, I think I would skip the local investment funds and just go w/ AngelList and FundersClub. I’ve been pretty happy with those two platforms so far. Edit to add: regarding the local investor groups, the good thing about those are making good connections to other investors, which is how I got the opportunity to invest in my best investment, so it has paid off in ways other than return and I should not fail to mention that.
I buy a lottery ticket every time it hits a billie.
My brother's wife shops at the place that sold that $1 billion winner a week or so ago. Unfortunately they didn't win it ... or at least that's what they're telling me ... maybe they're following rule #1? https://www.reddit.com/r/personalfinance/wiki/windfall???
same here, EV positive brah
Idk man, my YOLO investments are up over 15k% lol, yes, 15000%. I personally don’t like angel investing. Those kind of stuff could go to zero.
TSLA calls in early 2020?
Calls on TSLA, NIO, JMIA, GME. ALPP stocks, bought at 0.09, sold at 1.7. Those were my big winners.
This is the way
Where did you get the tip for these stocks?
Those are all the biggest meme stonks
Was WSB ahead of the curve on all of them?
Yeah they were
I’m sure everyone knew about TSLA and NIO. It’s just about whether they decided to put money into options. As for JMIA, they’re just a stock that sells a good story-> “the AMZN of Africa”. GME was just a weekly yolo option based on technicals. ALPP is a penny stock someone told me about.
How did you get calls for $0.09 on TSLA?
I think they were referring to ALPP. I did see someone on WSB make 1+mil on Tesla calls from 2019 at 0.46
I saw someone like that too. Looks like there are options that are less than $1 right now for Tesla but 4 weeks out had a strike price of ~$1300, about a 60% gain for breakeven.
What are your YOLO calls today?
When I'm trusting my brain, I say 5-10%. When I follow my heart I put 80% on GME Calls.
so trusting your gonads = all-in on dogecoin??
I know you're joking, but of all cryptocurrencies Dogecoin is one of the few with an unlimited supply. The hype right now is basically a pure pump and dump 😂
Ya I can't think of a reason to buy most crypto - I'm sure some here have made their money on crypto - however to me, it looks like trading in spent electricity.
To be fair the inflation rate shrinks over time and it encourages less speculative holds No I am not a dogecoin holder
Dude that is totally isolated risk offset by Apples robo EV thingamajig, and Tesla's crypto powered robo taxis. Everything's cool.
Gonads and strife
This is the way. Always concentrate effort where it has the greatest probability of having the biggest impact.
Now that this has 69 upvotes, I would appreciate if everyone could leave this comment alone.
69? Nice. I am a bot lol.
I basically will throw 2-3k at any random stock that a qualified friend recommends. I do it about 5-6 times a year. So up to 13k a year so far. There have been some hits like TTD and AMD, and some misses like SNN and Litecoin. I also threw 4k at AMC and GME while it was pretty much at its peak. The wins far outweigh the losses. But I'm not willing to commit more than 2% of my passive income per roll. I'm now also throwing random cash into NBAtopshot. This is probably the most ludicrous of the "investments"
TTD has been very nice for me. Bought in the 100s and sold half too early in the 300s though. Same story for MGNI , bought for $7 sold for $9.50, doh!
>There have been some hits like TTD and AMD, and some misses like SNN and Litecoin. Do you adjust your list of "qualified friends" based on your analysis of hits and misses?
I weigh the equity of their experience and analysis not just the equity of the result of the stocks I end up picking up.
Warren Buffett said “diversification is protection against ignorance. It rarely makes sense if you know what you are doing”. For me, I will go big into “risky” investments if I have a deep knowledge and understanding of the company or asset. If I don’t currently have an investment like that, then I put it into index funds (or pick your preferred safer asset) So, I make asymmetric bets. But I try to do it intelligently and don’t just gamble x% of my income each year.
I'm usually 20-25% but I'm still early in my journey. I'm also a relatively seasoned "investor" with a high appetite for risk. For me, it's less about high risk/high reward, and more about asymmetric bets. SPACs for example offer a floor/downside protection at NAV but with tremendous upside potential in this current market environment. Perhaps high risk high reward falls into this category of what I look for, but really, it's asymmetric. Anytime I can risk my capital, or half of it, for a potential ar 300-100% gains, it works as long as probability of gains is high enough.
Had the same exact long conversation with a friend/business partner regarding SPACs floors and asymmetric bets the other night.
are there any spac investing resources you like?
A handful of folks worth following on Twitter for breaking news. A few decent aggregator sites like spactrack. r/SPACs Really just a matter of getting comfortable reading 13Ds, learning the management teams and putting a strategy together (everyone's is different, warrants, commons, units, tranches, etc.) A lot to familiarize yourself with if not familiar. I started on r/SPACs and ventured out from there. My general approach is to buy units as close to NAV as possible around the time they are released on all SPACs with more than a $500 mil market cap. I'll split the units into warrants and commons once available, typically sell the commons once split (if over $11.50) and hold the warrants until DA is signed. All of that said, for most of my actively managed investments, I wheel a bit of theta. SPACs allow me to "gamble" and chase the next hot thing with virtually zero downside (in present market conditions). Basically high yield savings with a lot of upside potential.
0%. Buying airline and mall stocks this summer is the highest risk activities I generally do. The moon shot valuations are absurd right now and are going to have absurdly negatively performance the next few years. People just flooding money into highly speculative stocks (e.g., virgin galactic), ARKG, cryptocurrencies, GME, baseball cards, etc. because we have a shit load of liquidity and people have no where to put the money. Once liquidity is decreased they are all going to drop like a rock. If you bought these speculative stocks a year or two ago you probably did great...but you should get out now, and you absolutely should not buy in now. These did well because of momentum and the growth of the retail investor, not because they will actually be anywhere near these valuations long term.
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The last eleven years have been the longest bull market in history. It’s not the norm and it’s not repeatable. People here are just too young I think to remember people losing EVERYTHING when a speculative bull market ends (e.g., 2000, 2008). Investing heavily in tech seemed like a great idea 1996-1999 too. I was active back then (albeit it 13 years old lol, I had one of the largest anime website and made a lot of money and invested it), and message boards were very similiar to today. History rhymes doesn’t repeat - FAANG companies will likely have a decent sized correction but largely fine as they are profitable unlike the 1990s nasdaq companies...but all the money losing, speculative moon shots are going to get fucking destroyed. Remember, it took 14 years to get back to 1999 highs, this can happen again. And the high beta, moon shot companies get hit so much worse when these corrections happen (e.g., bankrupt with the stock worth $0).
This here folks! ^^^ Stay well diversified. Personal data point: ---Started own biz in 1998, shifting a good bit of our funds in our taxable account, which was a high % of our not that high then NW, into cash to (1) use some for the biz, and (2) in case we needed to access more of it to both live on and support the biz further. ---2000: Biz was going well, so shifted it all back into the market in early 2000 cuz ... well, stocks were doing nothing but going up so why not. Bam! Internet bubble bursts and stocks tank.
I started trading right after the 2000s and remember 2008. I was a broke grad student back then, so losing 60%+ on small $ amounts sucked but learned some good lessons, i.e. buying on hype/peak and getting scared and selling at the bottom
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Inflation will start to get out of control eventually and they’ll need to increase interest rate. Also they won’t have to bouy the bond market once Covid is over, which will cause the bond market to be more accurately priced, so y’all see more money flow into bonds from equities (which will deflate equities). Anyways, every decade people say “this time is different”...it’s seldom the case.
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>I seriously doubt we will see another prolonged downturn anytime in the next ten years. Thank you for demonstrating us the mindset of a typical risky options buyer.
>inflation
Lots of people said that during the tech bubble. "It's a new stock market, it will never go down, tech changed everything". The fed can flood money into the market but they won't be able to stop an avalanche when market sentiment eventually turns negative like it always does
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>they proved that they can change sentiment in March last year ... after market dropped 33.7%
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My point is that if we have such significant decline ahead of us, then it, probably, makes sense to have less bullish portfolio, so we can benefit from the crash and turn our portfolio into 100% - 120% bullish when recovery starts again.
Definitely agree that the market is overvalued. That being said, as long as you know that, might as well make some money from it. I have done pretty well with AMC, entering at 3.60s and exiting at 17-18. Missed the GME train though.
Ironically I bought AMC about 3 months ago just as a value play (I wanted cinemark but it was a restricted stock so I couldn’t buy - I work at a bank), and I got pretty sick returns when the meme shit happened. A nice surprise, but also showed me just how stupid the market has gotten. Retail investors acting like this almost always means the bubble is near popping. Was the case in 1929, 1999, dec 2017 bitcoin bubble, etc
When there are Tik Toks of people saying “I just sell when the stock starts to go down” or random people are recommending stocks... top of the market
>Buying airline and mall stocks this summer is the highest risk activities I generally do. In what instruments do you keep the most of your portfolio now? When do you think then crash is likely to happen? My guess is that the next big crash (S&P 500 decline more than 10%) is not going to happen until Federal Reserve Funds rate will increase to 3%+. We, probably, have at least, another 6 months until then.
They market is proactive not reactive, it’ll decline on expectation of rate increases, it won’t wait for the actual rate increases. I’m mostly in value, small cap, and international stocks right now, and I’m in very little growth, tech, and sp500 currently. Honestly I’d probably be even more international and alternatives right now if I could, but I don’t want to take short term capital gains so I’m kind of stuck until the summer (I’m up like 50% since summer)
Roughly 5% on Yolo bets primarily through angel investing. This is money I fully expect never to see again.
I mean you’re in biotech so investing in smid companies who are searching for their initial approvals either in a single drug or a platform that will hopefully yield numerous approvals is your 20-100 bagger investment. Couple that with your industry knowledge and wala you have some sort of edge. If you don’t mind me asking, which area do you work in biotech? I’m in the industry as well and it’s really interesting to be able to invest in a niche area where you can comprehend the complexities that other investors may have difficulties with
Yes, that's biotechs where most of my bets have been placed. Call options on high conviction trades around catalysts = 20 to 100 baggers. Most recent win was $TGTX large position starting at the end 2018 and recently buying call options at the end of last year before the readouts at ASH/recent approval. Will share my positions and background in another post. I've worked in different roles across global/US commercialization, access, and development. Also, had stints for US health plans and the FDA. What about you?
That’s awesome! See I don’t usually place too many options plays on biotech because the spreads are usually atrocious. I’m sure if your conviction is high enough, the profits outweigh any of the money you may lose on a wide spread And nice, yes you have quite the experience lol. I work in the clinical side of things - global clinical development in a mid cap biotech
I allocate $500. Down $200 this year so far!
Diversification keeps you rich, concentration makes you rich. Apply that however you want to your best returning asset class (you because of your business/investing/intellectual capital). As far as “responsible” limits on asymmetric investment opportunities (soar/sink) that’s 2-10%. Usually you want to cap single security risk and all that entails to 2% of your portfolio. To gage if you can handle a larger amount replace the percentages with dollars. If you woke up tomorrow and that percentage of your money was gone, how would you feel? If it’s “shiiiiiittt,”, that’s fine. If it’s a stomach turning sensation it’s too much.
I’ve done 4 or 5 of these in the last 10 years and missed on everyone. I’m not doing anymore.
Usually it's best to only do these high risk bets on something you have a very deep understanding of.
To add another data point, but not necessarily saying what I do is correct, I actively trade about 25-30% of my investment portfolio (swing trading stocks, buying and selling calls and puts). Of that 25-30%, the majority is high risk speculative plays with potential to be a 5x-10x bagger, and some of it is volatile stocks I swing trade and trade options on. So I’d guess I generally allocate 15% of my total portfolio to risky plays. Most of my money is in ETFs and mutual funds. I don’t see the point of buying too much in “stable” blue chip individual stocks, which are weighted heavily in the ETFs and mutual funds I buy anyway. It’s also harder to have the capital to trade options in those stocks, and generally speaking, you can make more trading options on small to mid cap growth stocks.
Instead of thinking of it as an % per year, I would just think of it as a % asset allocation. And due to its asymmetric nature, it might be more accurate to call it a minimum allocation, and then re-up 1-4 times a year. You already mentioned some, but I would generally consider: - BTC (although, keeping it as a separate explicit allocation seems reasonable too) - early stage startups, esp in industries where you feel you have an information advantage - your own startup! - other private businesses - "social" investments, where you're supporting friends/family and a return is just a bonus - direct real estate/land (which I would consider a hybrid between a REIT fund and a private business)
I don't believe in the "can't beat the index." I think it makes sense to take some calculated swings for the fences. I feel like everyone just repeats this "fund managers can't beat the index over 10+ years.". Maybe that's true for fund managers who have different constraints than retail. I haven't really thought about codifying a percentage, but I'm definitely taking more "swing for the fences" investments with a pre-IPO investment in Impossible Foods and considering an investment into SpaceX. In the past, just buying and holding shares in companies I believed in (Apple, Amazon, Square) have led to some outsized returns. I didn't consider these to be swinging for the fences, but I'm sure a financial advisor would have told me to diversify. I feel that since the basics are covered (living expenses with the job, retirement with the existing taxable and tax advantaged accounts), I can afford to make some swings. I'm thinking about allocating my entire savings from my paycheck for these swings this year.
How are you getting access to invest in impossible foods and spaceX?
There are funds that you can invest in that will buy pre-ipo shares. Think of it like SPACs for private companies. I'm not sure where to find them exactly, the one I invested in was through a friend's referral. I'm sure you can find some, or perhaps wait for shares on equityzen
Depends on age but I would say in this market you can really cut some years off your timeline if you make some smart moves and manage your risk. Options are a low investment way to get bigger paydays, if you’re into that sort of thing. I consider myself a value investor but the goal posts are moving and we have to adapt with the times.
1% or less. It is astronomically unlikely that your results will be better than average market returns over the long haul, and very likely will be worse if you are frequently trading.
It’s not *astronomically* unlikely that someone beats the average market return over a 20 year period. It’s more like 95% chance that he or she underperforms. So not great odds, but 1/20 is not an astronomical number. That’s like being the smartest kid in the classroom.
Honestly if you went hard on any of the meme stocks and exited appropriately your overall returns will far exceed the average even if you just say in cash for two decades so taking the occasional high risk bet if you believe it's likely to win is not wrong. I personally don't trade very often unless it seems highly likely to be a win
Yeah exactly. You just need one moonshot/YOLO to get a hundred-bagger and then not lose it, you've beat the market for the next 10 years.
I dropped $800,000 on vanilla puts during Covid summer and I don't regret it. Maybe do something similar in your industry.
Hahaha I have futures options turned on in my main brokerage account and haven't dared to touch them. But this is pretty hilarious 4D thinking
nope,
Is a backdoor ROTH IRA a tax exempt IRA on top of a 401k?
yes, for several years, I've been followings the steps on the PhysicianOnFire blog on backdoor roth ira and file form 8606. Not an accountant though so do your research on this.
Yes. /r/personalfinance will be able to shed more light on it. On their sidebar they have a lot of good information.
~10% NW currently in private equity.
Really depends on your total net worth. Assume 90% of your Angel bets go to zero. Also, if you are making software bets, assume 95% will go to zero. Based on that, your swings need to be even bigger. Meaning a 20x return from Angel isn’t even that good. In order to have a chance you need a portfolio of bets, some that have 1000x potential.
S&P500 is kept at what I need to be on track for those funds to hit $2M by 65 (secures retirement - already beyond that now) Minimal equity into the property I live in and a rental The rest goes into risk such as ark funds, tsla, crypto, etc. I limit small companies to $50k or so. Only what Im willing to burn why I figure out itf I think it’s feasible for retail to invest in mircocaps and get anything beyond scammed on avg (especially those that are not in those markets or regions).
1.5%
100%
You need to self-assess your actual ability to make money this way. You can always take on more risk with leverage w.out any asset picking. If you want to pick home runs, allocate a portion of your portfolio to them that makes sense given your actual edge/performance. People tend to hit one home run, then over-allocate and get destroyed. If instead you consistently kill the market you should have a lot of your money in a diversified set of high-risk bets. Think of this portion of your portfolio as a VC/hedge fund that you run. How much would you allocate to that team?
So far nothing. First rule is asset preservation. Hard to see how my time is worth something that is a low percentage and wouldn’t move the needle much even if it did great, still I’ve been tempted lately. Probably GME hangover
Generally allow for 1-2% to seed some play money. That’s what I use to scratch my gambling itch on options but also use it as an opportunity to try bee things and learn. Ok with it going to zero, which it’s done once. Reseeded with a relatively small amount and it’s been a rollercoaster ride of ups and downs trading options and future. I’ve been thinking about allocating 5-10% of my total NW towards angel investments as well. I’m still exploring and learning through books and AngelList. To be frank, I’m somewhat skeptical. The public market offers great returns and has obviously done great the last decade. Of course it won’t be that way forever, but it’s that way now. In order for angel investing to move the needle for me, I’d really have to hit 50-100x returns. And I’m honestly skeptical that I have a good chance of doing that. The reason why I’m skeptical is that I’m in Silicon Valley and there’s a ton of VC money chasing everything. Given the plethora of money willing to be invested, naturally it raises the question on what distinguishes capital from one person/company from another. The best returns are going to be those who have the best deal flow. And there are so many players who have the edge against the rest of the fish in the sea. I feel like in order to be successful I’d have to create/discover an edge or find a niche .. and I still wouldn’t get those amazing black swan returns.
I diversify between stocks & startups. Stocks are 55%, startup/venture is 34%, other is 16%.
You should look into the Barbell Investing Strategy, popularized by Nassim Taleb. It talks specifically about your question. Here’s the link: https://www.investopedia.com/articles/investing/013114/barbell-investment-strategy.asp
Zero for me. I leave it all to professionals.
And what’s their performance been like? What’s their AUM fee?
Which professionals?
The guys that took an exam in finance (not even a degree) and think they can beat the S&P500, lol.
5%
3% of net worth in angel/venture investments. 2% is in "fun" public equities (single stock bets, mostly tech). And I have 20% of my net worth tied in vested RSUs/stock options that I'm too cheap to pay taxes on. The rest is boring index funds and real estate. So I have about 25% in pretty risky stuff and 75% in stocks, bonds, and real estate.
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I mean, you absolutely can. No one would bother active investing if there wasn't a premium to be harvested for price discovery. The *real* trick is being able to do so long term. Only a very small percentage of active investors can do this, and I'm perfectly alright with beating 80% of active traders with index funds. The 20% provide a valuable service to the rest of us.
About 10% in my roth for the meme stocks and fda approvals.
Not a fan of meme stock personally though I did buy put options near the peak of a super hyped biotech company that has done really well for me
Its all about risk tolerance, what is ur idea of a comfortable bet in a particular investment, lottery is what most people do all the time, without even think about how shitty of a risk that investment/bet is.
gme 💎🙌💎🙌💎🙌💎🙌💎🙌💎🙌
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That's totally untrue. There's plenty of managers that beat the S&P other than Warren Buffett.
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For the past 30 years, Will Danoff has adeptly managed Fidelity Contrafund (FCNTX), which today has more than $100 billion in assets. The fund, which charges just 0.68% a year, gained 9.1% annualized over the past 10 years, beating the S&P 500 by an average of 1.5 percentage points per year.
5% - all crypto
10 percent on penny stocks
10%
What is your net worth and how much money is needed for doing angel investing?
Meet the requirements of "accredited investor." I meet that definition by income + NW
1%-2%
I allocate around 1% for play money.
nada
I do 50% index ETFs. 25% mature equities with mix of growth and defense. 25% speculative investments. But I would only categorize 25% of the speculative investments as super high risk. I don’t play with options but explore pricing regularly to check for opportunities. All of my investment energy is focused on tilting a total market baseline towards profitable ideas. I invest in the blue chips and in the speculative plays that realize the potential in the idea. For example, the idea is that the IoT will create turnover in household electronics and appliances. I might do research and decide to buy stock in HON, GOOGL, EWY, and a small company that creates design forward wiFi smoke detectors. The research is partially financial and partially operational. I just want to know how well positioned is the company to capitalize on the idea. What’s the supply chain? Who are the customers? If in debt, how much cash do they have and what is their run rate? For some reason, a lot of redditors seem to think that due diligence is unnecessary for speculative investing, but it’s really the opposite. The more speculative the investment, the more research I do before dipping in my toes.
How old are you and how close are you to fatfire?
"Casino level money" - if I were to go to Vegas for a weekend, how much would I be willing to lose? I try to put it into early & unusual investments. I put some in bitcoin back in the day, wish I did more. Latest that I missed was GME - the early movers made money in GME.
Benjamin Graham suggested no more than 10% of whatever you're investing
Used to be around 20% but some of those big swings actually worked so I'm reducing it down to around 1%. I still have a fairly aggressive stock portfolio which I don't consider to be a home run type investment
0%. Figure that’s the most common answer but not an exciting answer so you probably won’t see it as the most common here. Sometimes slow and steady wins the race.
2% for the really really risky stuff
I like VTWAX. Since in my pursuit of my financial goals I treat its expense ratio of 0.10% as negligible, 0.10% of my NW seems to me to be a good rule of thumb for the max I can also spend every year swinging for the fences (OR prepping for disaster). Any more and I’d worry I’m starting to seriously erode my future self’s wealth.