The "it's impossible to lose strategy"?

Discussion in 'Professional Trading' started by crgarcia, Jan 23, 2008.

  1. Some professional money managers use the impossible to lose strategy to attract new customers:

    96% or so of the money is placed in Bonds or CDs (let's hope not mortgage related), so that by year end it becomes 100%.

    The other 4% is invested in high yield, high leverage (and relatively high risk) strategies.

    Even if they COMPLETELY blowup all that money (the 4%), there are no net losses.

    Of course this is a very conservative strategy, but its the first step into attracting customers who were dubious at first:

    Money manager: "Our futures portion got an incredible 35% return, ranking among the top in this industry and blah blah blah".

    Customer: "Really? then I can risk 20% the next year!".
  2. dozu888


    brilliant idea, except there are already loads of products like this on the market.
  3. Capital guarantee - that old chestnut.

    If you start with $1mm and end with $1mm after one year, adjusting for inflation or interest at the risk free rate, then you have made a loss.
  4. That's right! I love the banks telling people all the FDIC garbage to get their $$$ in so they don't have to borrow at the fed funds rate.:mad:

    These folks typically think, "hey I'll make 4.3% this year with NO loss." NOT!!!!!!!!!

    At that rate and taxes, they are losing money.