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Not sure if this is the right forum for this, but I wasn't sure where to post. I've been a lurker here for a looong time. I started trading in Mid-2008. I went through the normal mistakes most go through and paid for my "education", lol. I learned more here than any other site or book, but learned the most (mostly about myself) through just doing it. I finally found a system that works with my personality (I can't tell you how many times I read that here and didn't really get it) and have become profitable.
My wife and I have a fair amount of money with our financial adviser. He has done an decent job for us, but does charge 1%. He has beat the S&P after fees, so I can't complain. I put our non-401k retirement money with him as I don't want to responsibility of a big oops on my end to impact our retirement plans. All of my trading has been done with money I set aside on my own.
From 2008-2011, I lost money. A lot in 08 and 09 as I had no idea what I was really doing. Less in 2010 and just a little bit in 2011. Since about Mid-2011, I have been profitable. I have averaged just over 24% return since 01/01/2012 fairly consistently. Returns have ranged from 20%-35%. I realize that the Market in general has been very good, things can change, my trading system may not work in different markets, etc.
I am considering moving the money that our financial adviser has under my control, but I am very nervous about it. How long should a person wait until they can be confident in their returns? Is 6 years enough of a sample size? I feel like I should wait to see how I do in a down market first, but I also see "lost returns" as well when I look at our retirement funds with our financial adviser.
TIA for any advice!
Can you help answer these questions from other members on NexusFi?
I think one of the things that you should seriously consider is the quality of life that you'd have if you decide to be your sole source of retirement income. If you go bust in a year's time, how will that affect you in twenty years? On the other hand, if you quadruple your funds, how will that affect you?
There are obvious considerations of wife/family/mortgage that can be strained if your performance is not consistent. How will you feel if you cannot support these aspects of your life?
You mention that your annualized returns are in excess of 20%. This is wonderful! I'm sure many here would kill for those kinds of numbers. I know you're probably thinking about how much more money you could make if you extend those 20% returns to your entire retirement account. Here's a question though. If you only made 1% per year on your retirement account for the next 30+ years, would that be enough to retire on? What potential life/family stresses could you experience if you make less than this amount?
I can't answer all of these questions for you, but one thing in particular stands out to me.
If you are already nervous about doing this, I bet you know what your decision should be.
First, all returns aren't equal. You can take a measure like return or sharpe ratio but for a trading system versus a long term investment they can mean very different things. Of course, you need to look at risk-adjusted returns but not just that but also you need to look at your total methodology. Are you running a single system? A single system is unlikely to be able to deliver consistent returns.
If you are trading discretionary/mix, what type of max drawdowns are you seeing? Is your trading diversified? For a 30% return, over such a short interval I'd want to see extremely low maximum drawdowns. Just my opinion but a professional trader should seek returns in the range of 50% to 100% and more if possible because the risks of trading are far greater then investing.
If you are only trading a single system, I advise you to leave your money with your adviser. On the other hand, if you are trading a basket of originally developed systems, based on different principles, with very low drawdown and uncorrelated returns and you have a goal of trading full time then you might take out only some percentage and try to scale up your trading.
It sounds like your motivation is just about the return. But, professionals are looking for a way to leverage their trading so they can trade more, work more on their craft, etc. It is not just about the "time" you spend doing anything but about the intensity of the pursuit.
First post here so take it how you will, but I know this from my family/wife experience... the trading capital you have acquired is just that, trading capital. You need to separate your retirement assets from trading assets. I've found this to bey key. I take huge risk daily trading. I don't need my long term objectives skewed by my daily thoughts.
If your returns are what you say they are and you believe in your system, then you only need bet on yourself. However, if you worry constantly about getting to the finish line called retirement... that may be something you want managed by someone else. Just so you're not responsible for a massive drawdown or loss.
I tend to be ultra conservative with my retirement accounts because the risk I take trading daily is big. Just my two cents.
I think there is a lot to be said for doing 401k solo. Cheaper fees, easier allocation the list goes on. If you have a solid system and you know where your exit is when you wrong I think you would be crazy not to manage it. Perhaps keep 50% in mutual funds and manage the other half. It doesn't sound like your day trading stocks as you sound more like a swing trader so it's a different kind of strategy i.e 5 min charts vs daily and weekly charts for example.
@Big Mike often says that traders tend to ignore a very powerful edge - that of diversification.
Basically, the old adage of not putting all your eggs in one basket.
After that is done the need of high risk taking is tempered down - your final strategy is defined both my your personality and compatibility with the system.
Thanks for the insight, everyone. I am going to just leave that money with the adviser, which looking at it again is why I did that in the first place. I know I would end up trading that differently as it is retirement money, which would almost certainly cost me money.
I keep around half my trading money in long term holdings and the other half I swing trade a few different ways. I'd probably be better served by trading all of it, at least as a first step. Just gets hard giving someone 1% to under-perform what I get some days!
