Advice on how to make 5%/month on $1 million

Saltynuts said:
Wait... WAT? So many questions.

There are tons of dividend funds and ETFs. Can you point to any that have outperformed the SP500 over a significant amount of time? Your basic strategy seems to be based on the view that dividend stocks can beat SP500 over time. I don't think that is the case, almost certainly not over a full stock market cycle. Shorting SPX is generally a recipe to lose money lol.

How on earth do you lever up 4 to 8x doing what you are doing? So far as I know, one can only invest 200% of ones equity in the U.S. stock market. And, of course, if you so long dividend stock A for $100, and you short SPX for $100, you don't net the two and call it basically a zero investment, that is considered $200 invested. I don't see how 4 to 8x is possible just buying/selling stocks and funds.

Excess cash each day? Dividend yields are very low. Even a 7% yield would be 70,000... FOR THE ENTIRE YEAR. So about $278 each trading day to "hedge out" with. A true pittance. And, since you are on margin, that would be reduced by your short/margin interest as well. Very little excess cash.

I think I just got trolled, but I hope I'm wrong and you can edumacate me on your methods lol!
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Obviously I was providing a very simplified approach. Though in real life this is how hedge funds (and myself) make trades. If you can reduce the volatility of a trade that has a positive slope, you can lever up on it. Very important to distinguish pure leverage from an actual source of returns.
 
Exactly 60% return a year? Sure, for a 40% profit split I can make that happen

blaze1635 said:
Would like to get some feedback on the following "not so hypothetical".

Consider the following constraints:
- U.S.-based brokerage account with $1 million in cash
- monthly target of 5%/month; this will be withdrawn, so account won't grow
- max trade limit of 50 trades/month
- ideally no more than 2-3 hours/day of watching/trading markets
- lowest risk to achieve the 5%; in other words, would rather have less risk than a return greater than 5%

How would you approach this?
what markets/instruments?
what trade sizes?
where to place stops and limits?
other thoughts?

Thank you for your time.
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Best and most feasible idea in this thread and probably among all of ET this entire month. You put out some quality content, respect.

longandshort said:
Sure.

1) open a portfolio margin account
2) go long your top 20 best high dividend payers/dividend growers and short spx— you need to be beta neutral
3) this will allow you to lever up 4-8x (so your $1MM is now $8MM of assets)
4) spend each morning using excess cash to hedge out both market and security risk (buy puts based upon your daily value at risk); takes 1-2 hours
5) spend 2-4 hours weekly checking your companies & reviewing potential additions

If you do this right, you can target an annualized yield of 6-8% on $8MM of capital paying 1% in margin. That translates into 40-50k/mo, which is close to 5% on $1MM.
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blaze1635 said:
Would like to get some feedback on the following "not so hypothetical".

Consider the following constraints:
- U.S.-based brokerage account with $1 million in cash
- monthly target of 5%/month; this will be withdrawn, so account won't grow
- max trade limit of 50 trades/month
- ideally no more than 2-3 hours/day of watching/trading markets
- lowest risk to achieve the 5%; in other words, would rather have less risk than a return greater than 5%

How would you approach this?
what markets/instruments?
what trade sizes?
where to place stops and limits?
other thoughts?

Thank you for your time.
More...

unrealistic, you will need to go buy and hold with a few "high dividend" rollers, and that's 10% to 15% annually, don't think you would be paid monthly, and the volatility of those "shares" will be high

you could trade Futures on SP500 in pre-open and 45min after open, if you have an accurate feel for market trends :)
 
blaze1635 said:
Would like to get some feedback on the following "not so hypothetical".

Consider the following constraints:
- U.S.-based brokerage account with $1 million in cash
- monthly target of 5%/month; this will be withdrawn, so account won't grow
- max trade limit of 50 trades/month
- ideally no more than 2-3 hours/day of watching/trading markets
- lowest risk to achieve the 5%; in other words, would rather have less risk than a return greater than 5%

How would you approach this?
what markets/instruments?
what trade sizes?
where to place stops and limits?
other thoughts?

Thank you for your time.
More...

This is now a somewhat simple creative accounting problem that has already been solved a few times over. PNL problems are either solved with fixed return instruments like T bills and MBS or creatively like Bernie did. Take your pick.
 
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