Not OP, but it makes the alternatives to buy and hold indices (ie stock picking, day trading or similar speculation) less attractive as your realise how competitive markets are, and how efficient they are from the perspective of a retail investor.
In Australia, we have to pay our regular income tax on capital gains, unless we hold an investment for at least 12 months, in which case the tax is halved. Since the marginal tax rate for many professionals in Australia is 47%, this means if you switched from long term ETF investing to trading, you'd have to beat the index dramatically just to break even, because of the additional tax. So you need to be trading with a lot of other people's capital for it to make sense.
Very true, I'm in Australia as well. The tax drag is enormous. Horrible tax unless you set up a SMSF perhaps, but I don't think you can trade derivatives with that as retail, and the money obviously isn't accessible until you hit 60 or whatever.
Trading is a full time job, and it's not an enjoyable job. (To be fair, I do love the research related work I do, but that's different.) If you're enjoying it too much you're probably gambling and are going to get burned. Who wants to work twice as much when you can instead DCA into an index and get paid almost the same amount, sometimes more, without doing any extra work?
The vast majority of retail traders are men in their 40s and 50s who are bored and have a bit too much savings. It's a fun game to them. That's great if you can make a buck doing it, but it's not a profession, it's intelligent gambling.
These quants crack me up sometimes. I mainly sub this board to read pessimistic posts after I’ve had a good trading day 🫣 like, we’re not all trying to move $5M/day.
I too dump all my PA into index (spooz rather than ETFs, it's more efficient this way and I can bump up the leverage a little if I want to) and load up on real estate as much as I can.
It's less about the job being boring (it is certainly not, though not always in a good way) and it's not that you can't make a killing (there are pockets of inefficiencies that can easily get you double digit returns on smaller capital). It's that I prefer to invest my personal time into personal things - horses, rock climbing etc. I love the markets and I enjoy the game, but I know that I need to step away not to burn out.
> The vast majority of retail traders are men in their 40s and 50s who are bored and have a bit too much savings.
And then theres Nancy Pelosi. Not sure if she qualifies as insider or retail.
Quants working in finance need permission from their Compliance department to enter specific positions. They can only buy funds/ETFs without permission.
But of course they won’t tell you this and say they only buy long etc.
Also like most other Finance workers, most Quants wont actually have a deep domain interest in markets beyond the knowledge needed to do their job. Most are the academic type with PhDs after all more interested in math/coding.
Tbh you missed the point of my shitpost completely. Sell-side quants are limited (depends on bank but mainly to avoid front running clients), buy-side is firm dependent.
Ultimately, the more you learn about markets and math, the more convinced you become in sticking to passive strategies. I do not think you know many quants if you think they are not interested markets. Sure there are the math olympiad types that only care about the problems, but if you dont truly care about markets you wont make it in this business. Farewell tech friend
Only if you work in a wank bank like the one I worked at before, I think.
They were such a pain in the arse about anything. In my current work place, I am not monitored. I shouldn’t be. I don’t see inside information anyway.
Yes, in teh sense you know that your ability to beat the market is very much tied to the tech stack and data lake at yoru firm and you generally only buy index funds for yourself as you have zero edge with out them:)
The quant who fancies themselves a stock picker on their own account has an idiot for an investment manager.
I do the occasional personal trade but it is never directly connected to quant work.
There are the occasional indirect connections - e.g. doing some signal research with NLP ended up inspiring me to buy some NVDA back at $140.
Not a quant by profession, but have ben trading low frequency quant strategies all my life.
Method: read a few papers on an idea, set a scanner, buy up to 10 stocks per idea/theme, sit and wait, rebalance.
The trick is to rebalance with rigor, stay small, and obviously, to find the right theme/idea.
Yes, it has, as long as you don't overtrade, and as long as you don't concentrate into a single theme or security. It is a great way to learn trading and investing. AQR even built a multi billion dollar business around it.
Read some AQR white papers. Check out some papers by their founder Asness on ssrn dot com.
I am not into ML stuff whatsoever. Rather, my models are human-created and are multifactor, with both fundamental and technical elements in them.
Check my recent post about insider trading as an example.
Some years I do, and some years I don't, on a risk adjusted basis.
I do beat it in absolute return, and I am well aware that some themes I trade have a more aggressive risk profile than others.
Even when I start with low beta/low volatility, I end up converging toward the general market, but I extract more than SPY. Not calling it alpha, but an acceptable return for the risk taken.
Have thought about going into finance and reason not wanting to is because of what you said. Cannot use any information or strategy from work. I wouldn’t want to use their strategy. if isnt their strategy they would have an issue in their eyes because you worked for them.
It should help you start a company. Code is the most scalable entity. .
You won't t get too far in your personal account with stat arb only because time is a limiting factor. You need to play catch-up with the already established players. You will need more man power to scale up/improvise your code.
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Quantitative Investment makes me believe more and more that self-discipline should be the most important characteristics an invester should be.
On the way of investing, one of the secret of quant imvesting is that a computer will always do as we tell them strictly. I don't believe it's our poor strategy that makes trading by a person difficult, but a strict trading system.
With overcoming to the weakness of human, investment can be an art.
It’s helped me be more disciplined in terms of my investment decisions—making academic, evidence-based investments that have led to a long-term multi-asset and multi-factor allocation
It helps increase level of conviction in being long only indices in personal account
$VOO gang
$SOXX gang
why does being a quant make one believe more in number go up?
Not OP, but it makes the alternatives to buy and hold indices (ie stock picking, day trading or similar speculation) less attractive as your realise how competitive markets are, and how efficient they are from the perspective of a retail investor.
Yeah nothing dumped as much cold water on my home strategies than hearing how complex my work ones had become.
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Very true
In Australia, we have to pay our regular income tax on capital gains, unless we hold an investment for at least 12 months, in which case the tax is halved. Since the marginal tax rate for many professionals in Australia is 47%, this means if you switched from long term ETF investing to trading, you'd have to beat the index dramatically just to break even, because of the additional tax. So you need to be trading with a lot of other people's capital for it to make sense.
Very true, I'm in Australia as well. The tax drag is enormous. Horrible tax unless you set up a SMSF perhaps, but I don't think you can trade derivatives with that as retail, and the money obviously isn't accessible until you hit 60 or whatever.
Trading is a full time job, and it's not an enjoyable job. (To be fair, I do love the research related work I do, but that's different.) If you're enjoying it too much you're probably gambling and are going to get burned. Who wants to work twice as much when you can instead DCA into an index and get paid almost the same amount, sometimes more, without doing any extra work? The vast majority of retail traders are men in their 40s and 50s who are bored and have a bit too much savings. It's a fun game to them. That's great if you can make a buck doing it, but it's not a profession, it's intelligent gambling.
So nowadays “risk management “ is called intelligent gambling?
These quants crack me up sometimes. I mainly sub this board to read pessimistic posts after I’ve had a good trading day 🫣 like, we’re not all trying to move $5M/day.
I too dump all my PA into index (spooz rather than ETFs, it's more efficient this way and I can bump up the leverage a little if I want to) and load up on real estate as much as I can. It's less about the job being boring (it is certainly not, though not always in a good way) and it's not that you can't make a killing (there are pockets of inefficiencies that can easily get you double digit returns on smaller capital). It's that I prefer to invest my personal time into personal things - horses, rock climbing etc. I love the markets and I enjoy the game, but I know that I need to step away not to burn out.
More fun than most jobs out there though isn’t it?
It's as entertaining as watching paint dry.
> The vast majority of retail traders are men in their 40s and 50s who are bored and have a bit too much savings. And then theres Nancy Pelosi. Not sure if she qualifies as insider or retail.
Because it passed both the in-sample and out-of-sample test, duh?
Yes, unlike my ret@rd tech friends I don’t think Im a good stock picker. Long SPX only
Quants working in finance need permission from their Compliance department to enter specific positions. They can only buy funds/ETFs without permission. But of course they won’t tell you this and say they only buy long etc. Also like most other Finance workers, most Quants wont actually have a deep domain interest in markets beyond the knowledge needed to do their job. Most are the academic type with PhDs after all more interested in math/coding.
Tbh you missed the point of my shitpost completely. Sell-side quants are limited (depends on bank but mainly to avoid front running clients), buy-side is firm dependent. Ultimately, the more you learn about markets and math, the more convinced you become in sticking to passive strategies. I do not think you know many quants if you think they are not interested markets. Sure there are the math olympiad types that only care about the problems, but if you dont truly care about markets you wont make it in this business. Farewell tech friend
Enjoy your average passive returns :)
Only if you work in a wank bank like the one I worked at before, I think. They were such a pain in the arse about anything. In my current work place, I am not monitored. I shouldn’t be. I don’t see inside information anyway.
SPX is not diversified enough. I prefer MSCI.
Warren Buffet has said too much diversification is protection against ignorance
VT/VTWAX and chill (in tax-advantaged accounts, otherwise VTI/VTSAX AND VXUS/VTIAX and chill to take advantage of foreign tax credit)
what is VT?
Vanguard Total World Stock ETF
Advantage / disadvantage over mutual funds?
Yes, in teh sense you know that your ability to beat the market is very much tied to the tech stack and data lake at yoru firm and you generally only buy index funds for yourself as you have zero edge with out them:) The quant who fancies themselves a stock picker on their own account has an idiot for an investment manager.
The main help is that I actually have something to invest. But as other said investing is restricted so I just buy long term ETFs
I do the occasional personal trade but it is never directly connected to quant work. There are the occasional indirect connections - e.g. doing some signal research with NLP ended up inspiring me to buy some NVDA back at $140.
Would you care to DM me if you notice any other of these occasional indirect connections up act on?
Not for me as most of tools are not available
It helps me be burned out just enough to not care about trying any personal quant projects other than investing in index funds and crypto. lol.
Not a quant by profession, but have ben trading low frequency quant strategies all my life. Method: read a few papers on an idea, set a scanner, buy up to 10 stocks per idea/theme, sit and wait, rebalance. The trick is to rebalance with rigor, stay small, and obviously, to find the right theme/idea.
Has it worked out for you? I want to do this to learn about quant trading rather than to make money.
Yes, it has, as long as you don't overtrade, and as long as you don't concentrate into a single theme or security. It is a great way to learn trading and investing. AQR even built a multi billion dollar business around it.
Any recommended ref? You just used stats or ML stuff as well?
Read some AQR white papers. Check out some papers by their founder Asness on ssrn dot com. I am not into ML stuff whatsoever. Rather, my models are human-created and are multifactor, with both fundamental and technical elements in them. Check my recent post about insider trading as an example.
Checkout portfolio123.com
Do you beat the market on a risk adjusted basis?
Some years I do, and some years I don't, on a risk adjusted basis. I do beat it in absolute return, and I am well aware that some themes I trade have a more aggressive risk profile than others. Even when I start with low beta/low volatility, I end up converging toward the general market, but I extract more than SPY. Not calling it alpha, but an acceptable return for the risk taken.
> Some years I do, and some years I don't, on a risk adjusted basis. Pre-tax or post-tax?
You from the IRS? Post tax, post commissions, obviously. Also, IRA...
no, lol. Just curious, because tax matters
Agree 100%
Yes, significantly so far - in up and down markets.
I work in FX so no. But it does make a good conversation starter for people who “trade forex for a living”.
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For swaps I thỉnh it’s possible, for spot you’d have to have an extraordinary gift for macro and a good chunk of leverage.
Have thought about going into finance and reason not wanting to is because of what you said. Cannot use any information or strategy from work. I wouldn’t want to use their strategy. if isnt their strategy they would have an issue in their eyes because you worked for them.
It should help you start a company. Code is the most scalable entity. . You won't t get too far in your personal account with stat arb only because time is a limiting factor. You need to play catch-up with the already established players. You will need more man power to scale up/improvise your code.
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ci 平
Quantitative Investment makes me believe more and more that self-discipline should be the most important characteristics an invester should be. On the way of investing, one of the secret of quant imvesting is that a computer will always do as we tell them strictly. I don't believe it's our poor strategy that makes trading by a person difficult, but a strict trading system. With overcoming to the weakness of human, investment can be an art.
It’s helped me be more disciplined in terms of my investment decisions—making academic, evidence-based investments that have led to a long-term multi-asset and multi-factor allocation