Need 2nd opinion on asset allocation

D

Drew07

I'm not sure exactly where this post belongs but I know career traders will be able to offer some useful input because of the expertise with risk management. Here it goes.

I'm a 21 year old college student . As an investment, my parents bought a townhouse for me and two of my friends to live in while in college. As an incentive to take care of the place and be somewhat of a landlord for them as well as an extra incentive to graduate and then pursue a graduate degree (not that I need any) they offered to give me the profit from the sale minus some expenses. The last few years the housing market in my area has done extremely well and we have decided to put it on the market in the middle of next year as prices are leveling out. If sold for market value right now I would recieve approximately 40k cash. I have no debt, no student loans, car payments, etc etc ( I know I'm extremely fortunate).
My parents stress education and have always encouraged me to concentrate on school and let them take care of finances...against their wishes I worked through high school and some in college in order to save and invest on my own, they are very responsible with money and thankfully have passed it down to me.
Here's my plan.
1.Immediately put 15k in a high yield money market account...make small deposits periodically and pretend its not there and let compound interest do its thing.
2.Put 15k in medium/high risk diversified mutual funds and maybe put a small portion into some ETFs.
3.Deposit about 10k into my Scottrade account and continue learn more about swing trading and capturing short term gains...develop strategys..track performance etc
4.Take the remaining portion and treat myself to a couple of nice meals...maybe a weekend vacation...a couple more monitors and maybe some training classes with a prop firm.

I plan to workk full time at a bank or other institution while getting an MBA...so I won't need any of this to pay monthly living expenses.
So basically what I want to know is, am I taking on an appropriate level or risk for my situation? Is there something I'm maybe missing?Should I bother with mutual funds? Any advice or input is much appreciated. Sorry if the post was a bit long.
 
Quote from Drew07:

I'm a 21 year old college student . As an investment, my parents bought a townhouse for me and two of my friends to live in while in college.
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Wow, well from this alone, it sounds like you have little to worry about and your future is golden. LOL, I guess the way to learn is to have your parents buy you a townhouse as opposed to the kid getting a job and paying his own way.

Just a note, if you plan to work for an Investment Bank or hedge fund, you cant be daytrading or swing trading on the side.
 
LOL, I guess the way to learn is to have your parents buy you a townhouse as opposed to the kid getting a job and paying his own way.

Is that sarcasm? What am I missing out on learning by recieving a gift?
 
Drew,

Thats grea your parents are doing that. I'm a bit jealous ... my parents talked about it with me when I went to school; but it was just talk ...

I figured I spent 25k+ in rent when I was in school ... all gone

hmmm well sounds like you got a decent plan ...

careful when you start investing or even if you go with a prop firm; meaning your new to investing so dont blow it all quick etc ...

Start small and learn as much as you can.

If you do ... do you plan make sure you dont start taking money from your safer investments and put it in your risky ones.
 
Quote from BDGBDG:

Put 20K into a bank account and 20k into a trading account. Screw the money market and mutual funds.
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If I don't plan on spending a large proportion why not put it in a MMA? Having it in a savings account at a half a percent is useless when I don't need the liquidity. I want to actively trade with an amount that I'm not scared to lose....I'm not willing to lose 1/3rd of my net worth. Any reasoning why I should do this? Thanks for the replies.
 
I don't see why the kid should become a target because of what is essentially a $40k gift. I knew of a few kids in their early 20s who received homes for graduation, free and clear. Many of them bitching about their RE taxes. If the parents have the means, why not? Drew seems pretty level-headed; he's not talking about pissing it on a Porsche Boxster, right?

Some advice: Do not go with Scottrade. Open an IB account and learn about derivatives. You can trade more asset classes with IB than any other broker: www.interactivebrokers.com. DO NOT invest in a load-fund. Buy ticker SPY through IB if you're simply looking for a passive exposure to the market.

Browse amazon.com for broad investment titles; technical analysis, options theory and trading, etc... read the reviews.

Familiarize yourself with modeling software; tradestation, neoticker, wealthlab [from fidelity]. I wouldn't trade any strategy that doesn't test at least a 60% hit rate and 2:1 favorable R/R under one sigma in stat-volty. That's the minimum req of profitability for any method I would implement.

Find a good CTA to invest with if you're not interested in putting in the necessary time/energy. Look for a high Sharpe or Sortino ratio and low drawdown. Barclays is a good start: http://www.barclaygrp.com/products/databases/btg.html
 
Thanks for the advice riskarb, I'm going to save your post. And as for being attacked, I expected it so I tried my best not to come off like some spoiled little prick whos parents throw tons of money at (because they don't, theyre not rich). I honestly just wanted some reasurement/advice from someone like yourself.
 
Quote from riskarb:

I don't see why the kid should become a target because of what is essentially a $40k gift. I knew of a few kids in their early 20s who received homes for graduation, free and clear. Many of them bitching about their RE taxes. If the parents have the means, why not? Drew seems pretty level-headed; he's not talking about pissing it on a Porsche Boxster, right?

Some advice: Do not go with Scottrade. Open an IB account and learn about derivatives. You can trade more asset classes with IB than any other broker: www.interactivebrokers.com. DO NOT invest in a load-fund. Buy ticker SPY through IB if you're simply looking for a passive exposure to the market.

Browse amazon.com for broad investment titles; technical analysis, options theory and trading, etc... read the reviews.

Familiarize yourself with modeling software; tradestation, neoticker, wealthlab [from fidelity]. I wouldn't trade any strategy that doesn't test at least a 60% hit rate and 2:1 favorable R/R under one sigma in stat-volty. That's the minimum req of profitability for any method I would implement.

Find a good CTA to invest with if you're not interested in putting in the necessary time/energy. Look for a high Sharpe or Sortino ratio and low drawdown. Barclays is a good start: http://www.barclaygrp.com/products/databases/btg.html
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I concur, except I don't know that I would advise to go with a CTA. Mutual funds tend to combine high fees with mediocre performance. They were ok when there were no other alternatives and we were ina long bull market, but those conditions no longer apply. You can achieve total diversification with ETF's at very low cost. There are a number of websites that provide in depth coverage of them. Some brokers even offer accounts that provide automatic reallocation among ETf's to maintain diversification. A good place to start is www.randomroger.blogspot.com. Also www.seekingalpha.com.

I think keeping half your assets in cash is very conservative for someone of your age, but it is not a bad idea until you get your feet wet in investing. You will undoubtedly make some missteps, and you don;t want all your eggs in one basket.
 
Quote from Drew07:


Is that sarcasm? What am I missing out on learning by recieving a gift?
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What exactly are you learning by receiving a gift like that?

I'm not making an attack at you, I just find your whole post quite funny. Oh yeah I'm jealous, who would not be if they had to help mom with the rent at the age of 14. Yeah there are po' folk out in the world.

My point is that it sounds like you have very little to worry about at your age, probably less so in the future. Your parents seem to take of it. You said you plan on working at a I-bank or financial institution. So focus on that, you will not be able to trade in a scottrade account on the side while you work there, for legal reasons. Your investing & trading will be quite restricted.

Take the whole 40k and start swing trading & speculative investing. Or start a business with it, get creative. Your downside is limited. Most people do not get a chance like that.

Sh**t, if you are serious about being an i-banker, go out and party while you can. $40k worth of partying can result in a lot of pu$$y.
 
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