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Lazlo

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

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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. 

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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.

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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 by tickerwatch

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      Most of all, forex trading comes with low associated costs. With little to no commission you’ll have to fork out for, thanks to how foreign exchanges are traded, there’s far more profit available for you to gain out of even just one or two deals. You won’t have to pay as much for ‘overhead’, when it comes to using forex trading, and that makes it a very attractive prospect for a beginner with a low rate to trade. 
       
      Another great strength of forex trading is just how adaptable it can be. Depending on the type of trading style a person has, or in your case, the type of style you’ll come to adopt in time, the forex market has something for everyone. It’s a very convenient market, operating at all times, meaning you can take up both short term and long term positions, no matter where you are in the world. 
       
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      Otherwise known as a real estate investment trust, putting your money into organisations like these means you have a share of valuable, income generating properties across a variety of commercial and domestic sectors. You’ll be in it with a bunch of other investors, helping to eliminate much of the risk factor, and seeing as real estate is tangible and always in need, you’ll certainly be able to find buyers and renters no matter where you are in the world. 
       
      It won’t be hard to find a REIT either. They’re on the stock markets and exchanges, and even just looking up REITs in your country could put you in touch with multiple different programs you might like the look of. All in all, investing in REITs can be a great way to diversify your portfolio, as we mentioned above, and could make real money. 
       
      The Takeaway
      If you’ve only got roundabout $1000 to put into something, and you want to be sure you’ll see your money again, it’s key to start small and think large over time. 
       
      You need to build up a base here, and to gain confidence with investing, and that won’t happen when you’ve only got a tenth of what you really need to see a proper gain. 
       
      But it shouldn’t stop you either! Your $1000 here could be well invested, as long as you keep in mind the pointers above. 

      This is a contributed post.
    • By kesh
      Hello, Traders!
       
      There are hundreds of assets in the market that may be interesting for trading.
      By studying various financial markets for a long time, we agreed on the need for automation of analytics. In order not to go through hundreds of assets every day, we created the options screener that lets you get ready for trading efficiently and make decisions with a clear head, since most of the calculations are automatic.
       
      OptionClue options screener analyzes the 400 most liquid US stocks and due to a special algorithm chooses the most relevant assets to trade.
       
      The screener saves you time and identifies the most promising assets that may start actively moving (for example when they are in sideways trends and triangles) and at the same time, it takes into account conditional «high cost» or «cheapness» of underlying options.
       
      These signals can be used in options market when trading straddles and strangles, and in the classic stock market.
       
      To learn more about the product, you can follow this link.
       
      I think, for many of you, it will become a valuable tool that helps find new trading ideas every day.
       
      I encourage you to give it a try.
       
       
       
       
       
       
    • By Kim
      10 Reasons Why Trading is Difficult
      It is hard not to trade too big when you really believe in a trade entry. It is even harder to take a big loss if it goes against you. It is hard to keep taking your entry signals during a losing streak. It is also hard to miss a signal and watch it go on to be a big winner. It is hard not to add to a losing trade when the price keeps looking better as it falls lower and lower. It is hard to be on the wrong side of a trend. It is hard to buy a breakout in trend because it looks too high. It is hard to miss out on the beginning of a big uptrend. It is hard to cut a loss early with the ego wanting to be right about the trade. It is hard to let a winning trade run when you would prefer a quick gain than a bigger long-term gain. It is hard to buy when everyone is fearful and hard to sell short when everyone is greedy. It is hard to trade through different types of markets, bull markets, bear markets, volatile, trending, and range bound because the rules keep changing. It is hard to convince your friends and family that there is a process to your trading and that you are not a degenerate gambler. It is hard to ever quit trading after you have tasted how sweet a big winning streak is and how life changing it can be. 10 Ways Traders Lose Money In This Market
      Making money in trading is a function of the market matching our methodology and approach to the market. But at the same time, traders need to be focused and consistent, as there are several ways traders lose money.
       
      We trade with a philosophy and we profit when it syncs up with the current market environment. We make money when our winning percentage is strong and our losses are minimal, or when or wins are big and are losses are small.

      If we have the discipline to follow a system consistently and manage our risk by it, then the profits will come when the market aligns with our method. Until then it is our job to keep our losses and drawdowns under control.
       
      In short, there will be periods where everything is working great. And periods where trades are getting stopped out and lost quickly. It is our job during the latter periods to make sure that the losses are minimal (and that we understand the ways traders lose money). This is a tough task, considering all the different types of traders and approaches. Let’s review some examples.
      Day traders have trouble making money in markets that lack intra-day volatility. Trend followers can’t make money when markets don’t trend in one direction for any length of time. Momentum traders lose money when stocks fail to breakout over resistance and trend. Traders that use chart patterns don’t make money when trend line breaks don’t lead to sustained trends. Swing traders don’t make money when support levels fail and stop losses are hit before a reversal. Dip buyers don’t make money when downtrends begin and lows get lower. Option trades lose money when markets fail to trend before the option expires. Option sellers lose money when parabolic moves put the sold options in the money. Investors lose money in bear markets. Perma-bears lose money in bull markets. There are several ways traders lose money in the market. Successful traders ensure that those losses are small.  
      Thanks for reading.
       
      Read this and more from Steve on his blog NewTraderU.
      Twitter: @SJosephBurns
       
      Related articles:
      Probability Vs. Certainty Trap
      Why Retail Investors Lose Money In The Stock Market
      Are You Ready For The Learning Curve?
      Can you double your account every six months?
      Are You Following "Tharp Think" Rules?
      Adaptability And Discipline
       
      Want to learn how to reduce risk and put probabilities in your favor? We discuss how to do it on our forum.

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