how to invest $500k

[dozu888]

A close friend of mine was asking me about this so I'd just throw it out here since there are plenty of brains on this board...

He has $500k cash spread around several accounts (including IRA's), and he is already using $200k on a monthly equity system (around 30% annual return). The other 300k is sitting there doing nothing. He is in his 30's so there is no need to be conservative and would like to take on more systems with decent risk/reward. Some options I can think of:

1. spread the 300k around the system vendors such as on Collective2 or StrategyRunner. The problem is all these are blackboxes and who knows if they are curve fitted to the max, with unrealistic fills in back tests.

2. just dump them in mutual funds, or managed futures. problem, cannot expect more than 15% annual on those.

3. develop systems by himself.... problem, too time consuming (he is consultant by profession and his earns $1k/day, so time is money).

Any suggestions? thanks in advance.

 

[Albert]

Jesus, 30% per annum? Over how many years? Why do anything else? In 20 years he'll own it all. That's a double every two and a third years. That is 10 doublings in 23 years. 200,400,800,1600,3200,6400,12800,25600,51200,102400,204800.That's 205 million in 23 years with no risk to the other 300k. Huh?
Albert

 

[jho]

Quote from Albert:

Jesus, 30% per annum? Over how many years? Why do anything else? In 20 years he'll own it all. That's a double every two and a third years. That is 10 doublings in 23 years. 200,400,800,1600,3200,6400,12800,25600,51200,102400,204800.That's 205 million in 23 years with no risk to the other 300k. Huh?
Albert

Maybe it's already scaled up as high as it can go without too much slippage.

Can he modify his system for futures?

 

[dozu888]

the equity system he runs are geared for small-mid cap stuff and does suffer more slippage with bigger size.... and does not work for the popular futures like ES

 

[Albert]

OK, so he has been in an unusually strong up trend since the low in 2003. Does he get the same results in Bear markets?
Albert

 

[dozu888]

Quote from Albert:

Jesus, 30% per annum? Over how many years? Why do anything else? In 20 years he'll own it all. That's a double every two and a third years. That is 10 doublings in 23 years. 200,400,800,1600,3200,6400,12800,25600,51200,102400,204800.That's 205 million in 23 years with no risk to the other 300k. Huh?
Albert

he's been running this for the past 2-3 years, after back testing over a much longer period....

imo 30% is quite achieveable especially the market is drifting up in the past years, if you are in the right sector (commodity, industrial), a monkey can make 30%

and look at all the emerging market mutual funds, they average 40% over the last 3 years. And if you bet your $$ on India 3 years ago, the index has been up 500%

 

[Albert]

Right. That is always the key, find a trend and exploit it. Hope that you aren't the last one on board and if you are, know your out point. Doesn't matter if it is equities or commodities, etc. Depends on discipline and psychology.
Albert

 

[toc]

'That's 205 million in 23 years with no risk to the other 300k.'

Good maths!, in 23 years he should donate some money to the abused/abandoned dogs shelters and earn some Kudos from the society!

 

[krazykarl]

Quote from jho:

Maybe it's already scaled up as high as it can go without too much slippage.

Can he modify his system for futures?

use arbitrage to reduce slippage.

 

[thecalip]

30% annual return? He will be replacing Warrent Buffet in the short future.

Quote from dozu888:

A close friend of mine was asking me about this so I'd just throw it out here since there are plenty of brains on this board...

He has $500k cash spread around several accounts (including IRA's), and he is already using $200k on a monthly equity system (around 30% annual return). The other 300k is sitting there doing nothing. He is in his 30's so there is no need to be conservative and would like to take on more systems with decent risk/reward. Some options I can think of:

1. spread the 300k around the system vendors such as on Collective2 or StrategyRunner. The problem is all these are blackboxes and who knows if they are curve fitted to the max, with unrealistic fills in back tests.

2. just dump them in mutual funds, or managed futures. problem, cannot expect more than 15% annual on those.

3. develop systems by himself.... problem, too time consuming (he is consultant by profession and his earns $1k/day, so time is money).

Any suggestions? thanks in advance.