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Anchoring an account with yield and money management

  1. Hello,

    Lately I have realized how important having some yield in a portfolio to offset losses. With a little money management, the yield can really offset risk, for example, if your portfolio earns 1K a month in yield, and you use that money to purchase OTM butterflies, your risk is essentially only what you have in debt instruments or bonds, which is conservative? What are your thoughts?

    The second part of this post is regarding obtaining the capital required for that kind of yield (~.5 percent a month which let's say is around 200K in capital). Are there traders willing to share how they might have procured that kind of capital, through what means, and was it through personal credit or as a business entity?
     
  2. To yield 1k a month off 200k, you need 6% yield pa. Which conservative bonds have you found which yields this?
     
  3. True, but I don't want to get off in the weeds discussing bond ratings, convertibles, and other debt instruments, what might be conservative for some may not be for others that is understood, but let's say you could make around 1/2 a percent yield per month for exercise.
     
  4. Let's not since it is unrealistic.
     
  5. While you can set up a fixed income/yield portfolio with a combination of HY, REITS, MLP's, etc to generate 6% cash flow it would have a much higher risk profile than say a 5 yr laddered AAA corp bond port. (I think that was Visaria's point).

    So even though the FI has risk, using the concept of using the cash flow to then invest in risk premium has always been appealing to me.

    I know it is not new or novel, can anyone suggest any good reading/resources on this topic . Thanks
     
  6. They all tell you that you must..

    "speculate to accumulate"

    but..of course it is the exact opposite..in that you really must..

    "accumulate to speculate"

    Fixed income returns..are..needless to say..not great..with senior corporate bonds being the best bet..but this particular market is not easily accessible to the retail investor..it takes a good deal of work if you do not know people who are already doing same!

    I was offered a 9% coupon junior bond recently..a major bank..no maturity date..min investment €100k..I asked the person to send me on the Bloomberg chart..which showed the bond had not traded in over 1 year!

    I emailed the person back and said..

    "No Thank You" :)
     
  7. It would be difficult to get that type of yield with short term bonds. Going long bonds with that type of yield carries similar risks as stocks when interest rate gyrates.

    Have you considered a blend of bonds, dogs of the DOW (~4% yield) and MLP (ETP yields 12%) to get a 6% payout? However, I have not studied the risks of such a portfolio.

    Thank you for your post.

    Best wishes.
     
  8. To "accumulate to speculate", you need time. Unfortunately, those that have time only want to "speculate to accumulate".

    When they finally understand "accumulate to speculate" they run out of time.:(

    Well, that is life.
     
  9. You need better advice, not to hard to put together the portfolio I mentioned in post #5. A diversified yield oriented portfolio does have to equate with speculation.
     
  10. I only take advice from those who can show exactly what they are talking about..any other way would be just silly and childish!
     
  11. Not necessarily..as there is always "frugality" :)
     
  12. How many 20 year old understands frugality so they can accumulate to speculate in later years?
     
  13. To have to be frugal in old age is sad because most don't need to be if they accumulate to speculate instead of speculate to accumulate.
     
  14. Accumulate to speculate, this is exactly the idea. Does this reference a specific book or article? I admit over a period of time myself, I am in the red one month, in the green the next, but what if you use yield in any form for highly leveraged strategies? Now it would be flat one month or several months and green the next, over time this looks better I would guess as a preference for some.
     
  15. I've been thinking about this same concept. It rings similar to what Nassim Taleb describes as his "Barbell" approach.

    For instance having ~95% of the portfolio in 'safe' yield based investments like T bills/notes or highly rated corporates (it doesn't specifically matter for this explanation) such that you generate a 'base' yield on the portfolio , say 3% (relative to the total equity value of the portfolio), then using the remaining 5% of equity to make high risk high reward types of bets where your maximum loss is no more than 100% so that you can not possibly have a drawdown larger than the difference between your risky allocation of 5% of equity minus your 'base' portfolio income of 3%, of 2%.

    The specific % allocations and whatnot could obviously be jiggered around but that's the idea. Is anybody here familiar with a strategy such as this?
     
  16. if your returns are all over the place..that implies you do not know what you are doing..as..it really shouldn't matter what way the markets go if you are "clued in "

    of course..this is far from easy..and requires dedication..time commitment..and the ability to act swiftly and decisively without hesitation

    at the moment a lot of people think they know all about making money..just buy the dips and it will keep rallying to new highs..it might keep doing this fora week..month..6 months..or even a year..but..as sure as day turns to night..the first chance and it will tank so fast you won't know what hit you..

    remember..there is nothing new here..just the same old story..but at a different TIME !!!

    only fools speculative to accumulate..and clever people accumulate..then..speculate..with money they can afford to lose
     
  17. Accumulate to Speculate, this indeed works. I've used this as a basis for a mechanical strategy over the past months and it works as designed, I have and am doing some tweaks here and there. Now, I am trying to do some calculations based on a much larger pool of capital, and where to get it.
     
  18. Ahh, but many said this time is different, bitcoin is different....

    I remember it very well: In 1999, 2000, we printed money by buying on a dip and selling on rally, until March 2000. I "retired" from my day job in March 2000 thinking I had so much money in the stock market I could never spend it all. I barely survive till 2003, by doing part time consulting. Then in 2006-7 everyone said this time it was different. It was not.

    I don't know how many here understand what you are saying.

    Best wishes to you.
     
  19. The idea is simple, appealing, the logic correct but it is very difficult to execute - didn't work for me.

    The devil is in the details. Very few can find a working process using this concept. Why? Without good luck or good timing, you will mostly be running in place, year after year. Imaging you doing this since 2009, in 9-10 years, your returns would be near zero, if like him, you bought DOTM puts and waited for black swans while others were making 20% a year in returns year after year.

    I suggest you back test this method and hunt for a process that could work using this strategy, maybe you can find something workable. Like MrScalper said, this time is not different and the black swans will surely be in our future, but no one knows when.

    Regards,
     
  20. I appreciate the response. I wasn't thinking of necessarily black swan type of events but using the risk allocation of the portfolio for highly levered directional types of bets in either futures or equity options, something like that.
     
  21. The devil is in the details.:finger:

    Good luck.
     
  22. How do you grown account to $200k? From disciplined savings over the years first, than you grow it from trading/investing along with continued savings if your working.

    From the brokers I am using, $200k of capital is currently yielding me about 180 basis points ($1,800 per year). Now keep in mind my aim is to make >3,500 basis points per year (35%) from trading - so in the bigger picture the yield is not why I have broker accounts.

    I was piss poor after blowing up in my 40's & had to pay the IRS $175K I didn't have, not to mention my expensive drug addiction. I worked a minimum wage job, got clean, paid off the IRS, got a better job & inside of about 6 years had saved & traded up to $200k. If I can do it anyone can if they set their mind on it.

    Like Warren Buffet said 'I never knew anyone that got rich keeping their cash in the bank'.
     
  23. If you are still following this thread, then let me give you another answer that Handle123, one of my "mentors", gave a few times on this forum: Dance options around your equity holdings.

    Also, comagnum, one of my favorite posters, mentioned Warren Buffett. At one time I tried to backtest Warren Buffett's holdings but could not match the returns of BRK. Then some professors at Yale published a paper saying they could replicate his returns by using ~1.7 leverage on margins.
     
  24. COMAGNUM, it's weird, but 200K seems to be the number I would need in capital to make a living with the system I'm using. I have a lot less than that right now, I guess I'll have to be patient.
     
  25. What you are describing is similar to Constant Proportion Portfolio Insurance (CPPI) strategy. There are couple of variations around that strategy.

    You could google CPPI and can read couple of papers describing that strategy.

    https://www.pimco.com/en-us/insight...portfolio-insurance-versus-tail-risk-hedging/
    https://www.cfapubs.org/doi/pdf/10.2469/faj.v51.n1.1871