Big Money shuns Big Returns OR Volatility

Discussion in 'Trading' started by retire45, Apr 27, 2008.

  1. Just got finished reading The Complete Turtle Trader and what stuck with me the most is the resistance they got from big investors. Does big money dislike high returns?, or is it the volatility that comes with such returns. Is it an impossible dream to achieve 100% year after year with a smooth equity curve? I sense there is a serious distinction between what is possible with a small account and a large one. I suppose at the end of the day just trade your system and see what happens..

    Looking for some thoughts from those that REALLY know Wall Street thinks...
  2. 1) Big Money dislikes volatility. Big Money also seems to have an expectation that high returns are followed by high drawdowns.
    2) Big Money also seems to have a preference towards earning management fees, not performance fees, while earning slightly above average returns, not outsized returns. Yes, it is a misguided herd mentality.
    3) When you are undercapitalized, you have to generate eye-popping rates of return in order to get ahead. With a "larger" asset base, you will want to tone it down a little bit.
    4) Trade your system and keep the clients with whom you have the best rapport. They will require the least amount of babysitting.
  3. Thanks.. That explains the under performance of a lot of Mutual Funds.. they are paid not to lose money and "maybe" beat bank rates.
  4. at 2% fedrate even a 2% fee is priced to a number equal to the amount of money given to them by big money. For a money manager this is equivalent to playing a game where they are guaranteed to win all, and never lose. The bigmoney is dumb money. That is why every man in his right mind MUST learn to trade.