How much capital (%) do you invest in different assets?

[Lazlo]

Hi everybody, 

I searched for a similar thread but couldn't find anything close to my question. 

I want to ask a rather personal question and therefore hesitated to do so. If this is not adequate just let me now.

How much of your entire capital do you invest in different strategies? And with different strategies I mean preserving your capital, steadily increasing it or increasing it dramatically, like Anchor-Strategy, Steady Condors, and Steady Options. I would also count investing in businesses and real estate as a valid approach. Personally, I would not only say it is a valid approach to invest in multiple assets but almost a necessity. But what about you?

For example, do you allocate 10% for Steady Options and 25% for Steady Condors and 50% for Anchor Strategy? Do you own real estate? Do you plan on doing so?

I know, I already can hear "you have to answer this question for yourself" and "depends on your risk tolerance". But I want to know your opinion and experience on how you would approach investing, now that you know what it takes. What would YOU do if you started from 0 again?

I'm not interested in answers like I could imagine doing this and that. I would expect something along the lines. First I would start saving x amount of money while I learn the Y-Strategy with paper trading. After z time I would then use x amount of money in A-Strategy until I reach point S (some amount of money). At this point, I would still do Y-Strategy but also get my hands on Strategy Z, which promises higher returns. And so on. 

I'm aware that this is a question not particularly related to SO but I value your opinions and at least to me a plan for investing is the absolute most important aspect. It's like having an exit strategy for your trades before you open them, just the other way around.

Why do I want to know your experiences? Because I seek a rough guidance on approaching investing. I would like to compare each other approaches. 

I think this topic is a significant aspect of investing and therefore for trading. It's equally important for beginners as it is for experienced investors and traders. 

[Kim]

I believe that any asset allocation has to be based on your risk tolerance and time horizon. To most people this is kind of obvious, but when it comes to implementation, many people don't follow this simple rule.

For example: how much would you be comfortable to lose in the stock market before bailing out? If 20% loss makes you nervous, maybe it's better to allocate more assets to real estate?

 

Regarding our strategies - again, it's all about risk adjusted returns. For example, Steady Condors 5 years CAGR is "only" 17%, way less than SO - but it has been achieved with much lower volatility. While I cannot really give any concrete recommendations (Chris or Jesse from Lorintine should be able to help here), but I believe that riskier and more volatile strategies should get smaller allocation.

[tickerwatch]

 

I employ quite a few different strategies, and Steady Options and Steady Condors are just some of them. Almost everything I do is risk-defined...meaning when I go in, there's only so much I can lose on any position/strategy. In addition to that, almost all of my trades have about a 1 month timeframe on them. What I personally do is ask myself, worst case scenario, total market meltdown, what kind of loss am I "comfortable" with (comfortable in quotes because nobody likes to lose anything). 

 

For me, that number is 40% of my account. I'm pretty young and also have a big risk appetite - so yours might be lower. Losing 40% in one month is massive, but this is worst case scenario stuff, and my big winning months the other 99% of the time compensate for this massive loss every 20 years or so.

 

So 40% is the most I'm willing to lose in 1 month. Next I make a list of all of my strategies and look at the max loss of each. I adjust total allocation of each strategy so that the safer stuff has a higher allocation, and the total max loss on all of my strategies equals 40% of my portfolio.

 

It's not an exact science, but it has served me well, and it does a great job of keeping cash in my account. Realistically, in a total market meltdown, where SPX drops 20% in one month, I probably won't go max loss on everything. I'll either adjust, or my long premium positions will actually make - not lose - money. Steady Options is one of my few strategies that is long premium. I'm mostly a premium seller - and as a premium seller, pretty much everything I sell (short premium) goes to max loss in a market meltdown. So I place trades under the assumption that everything I own can go to max loss overnight. Following this, it is impossible to blow up my account.

 

Edited August 28, 2017 by tickerwatch