20% per year with as little risk/work as possible?

[MYDemaray]

Actually, I found this while perusing for bond-trading ideas. I am a systems trader so my day is never "exciting"...all I do is take signals. Know of any bond-trading system ideas?

 

[Aaron]

Someone on ET once said "If trading is exciting, you're doing it wrong." There's a lot of truth in that.

 

[MYDemaray]

Agreed!

 

[MRWSM]

Quote from michaelday:

This may be a little bit off topic, however I would like to start a discussion in which we would provide ideas/opinions about investing for a longer term, the part of capital that is not used for daytrading. For example if one uses $100,000 as his working daytrading capital, but also has a few hundred K's on a side what would be the best strategies to invest it with the goal of gaining 20% per year and then compounding it? For example 40% bonds,
40% S&P 500, 20% high growth high risk mutual fund, etc...

How about this: Since the extra 200k will be long term. Set a date like 12 years from now as maturity. Allocate 40 percent in stocks and 60% in safe fixed income investments (hopefully 4% or more) that will give you an end result of break even at worst even if the stocks go to zero at maturity. If stocks go up in 12 years you can make more than 20% a year. This is basically a principle guaranteed investment that can give some awesome returns.

 

[omcate]

Quote from Babak:



oh you mean like LTCM?

Quote from ChrisRT:

lol Babak..

That way if you take huge risk and lose big..you have congress to bail you out..no worries <cough>

Moral hazard is a wonderful thing I guess <sigh>

Same for D. E. Shaw. They had Bank of America to bail them out.

 

[MYDemaray]

It works like this. Invest 90% of your money in an index tracking stock with no leverage. Recieve dividends in the realm of 5%. Over the longer term you may make another 7% in capital growth. This gives you about 12% PA.

Then you need to find yourself a good short term index futures swing system that issues both long and short trades. Use the other 10% of your capital to take equal and opposite short positions in the corresponding futures market to your long position in the index tracking fund. You are then short against the box. If you lose on one side you gain on the other.

You can even take a short futures position with a nominal value slightly more than than your total equity position.

In the longer term your upside on the equity poisition will be very similar to that of a buy and hold position. However, the short futures position should get you another 7% or 8% PA. About 100% of margin if you have a decent swing system.

Why not turn your system on its head? Change the default positon on your system to long. If you do get a sell signal, go flat. It's essentially the same thing except 1.) you don't get the dividend income, but 2.) you get Section 1256 tax treatment which should more than make up for dividend gains if your system is any good (in the US that is). 3.) You'll have to deal with trivial inconvenience of rollover every 3 months.

Then, put the remainder of the account in cash (90%) in fixed income and hold until maturity to elimate principal risk...

Just a thought.