Join Early Retirement Today
Reply
 
Thread Tools Search this Thread Display Modes
No Big Fun to Realize in the Fun Account
Old 08-03-2016, 04:10 PM   #1
Dryer sheet aficionado
 
Join Date: Jul 2014
Location: Vancouver
Posts: 27
No Big Fun to Realize in the Fun Account

So back in 2010 we returned from a year of sailing and had some left over cash in a tax deferred account. Market returns were not impressive.

A friend had developed a computer trading system. Backtested 30% returns etc. etc. He was doing it on the side for fun, but wanted to show real returns with real capital to market his system to hedge funds.

I dumped some money in ($108k) and thought what the heck, we'll give it try buying 10 stocks on the TSE and making trades once or twice a week. In 15 years I would be able to buy an NHL Hockey team!

Within a year we had turned it in to ~$80k.

But by 2014, I had more than doubled the original investment. Rather than stay fully in the game to buy the hockey team, I pulled out all my original investment.

Now playing with "house" money, I thought what the heck now I can leave it in guilt free and see what comes of it.

Now 630 trades in, the fun money has a five year annualized rate of return of 27.7% (21.73% since inception with the first year dip). It's running 8% shy of the backtest performance, so a hockey team would be a long way away, but still better than the TSX at 9.35% over the same time period.

The problem with "house" money is it's not "house" money. It's my money, and I have to consider its place in a portfolio regardless of source. Especially since I want to retire soon. I don't want a large percentage of my invested assets in volatile resource and energy stocks.

So I am about to rebalance again and pull some money out to put in the broader diversified pool of index funds. Sadly realizing that my fun money will never turn into something big! A $30k loss would represent a year of cruising funds.

I'll still keep it at the level of $100k as I enjoy the game and need to have a certain level to have decent returns after trading fees. But all the fun will be in pointing to a rate of return rather than a giant pool of funds.

My friend has since gone on to an exclusive license to a hedge fund after adapting the model to American markets. I remain grandfathered and able to play in Canada for as long as I want. (Or as long as the thing continues to work - once millions of dollars start chasing the same little stocks, the gains will disappear.)
__________________

__________________
Going Sailing is offline   Reply With Quote
Join the #1 Early Retirement and Financial Independence Forum Today - It's Totally Free!

Are you planning to be financially independent as early as possible so you can live life on your own terms? Discuss successful investing strategies, asset allocation models, tax strategies and other related topics in our online forum community. Our members range from young folks just starting their journey to financial independence, military retirees and even multimillionaires. No matter where you fit in you'll find that Early-Retirement.org is a great community to join. Best of all it's totally FREE!

You are currently viewing our boards as a guest so you have limited access to our community. Please take the time to register and you will gain a lot of great new features including; the ability to participate in discussions, network with our members, see fewer ads, upload photographs, create a retirement blog, send private messages and so much, much more!

Old 08-03-2016, 04:45 PM   #2
Thinks s/he gets paid by the post
Sunset's Avatar
 
Join Date: Jul 2014
Location: Chicago
Posts: 3,381
Gee, sounds like an Awfully nice thing to have happened.

At least you are smart enough to get some out now. Unlike my relative who told me how he bought shares in this tiny North Sea oil company, and quickly became a multimillionaire. He sure was proud.
He was also stupid as he left it ALL in and 1 year later it was gone, and he is working again.
__________________

__________________
Sunset is online now   Reply With Quote
Old 08-03-2016, 04:58 PM   #3
Dryer sheet aficionado
 
Join Date: Jul 2014
Location: Vancouver
Posts: 27
Quote:
Originally Posted by Sunset View Post
Gee, sounds like an Awfully nice thing to have happened.

At least you are smart enough to get some out now. Unlike my relative who told me how he bought shares in this tiny North Sea oil company, and quickly became a multimillionaire. He sure was proud.
He was also stupid as he left it ALL in and 1 year later it was gone, and he is working again.
Oh fear not, whatever smartness I have had on this one has been offset in real estate. Convinced my wife that last summer was the right time to sell real estate. Feeling overexposed with our retirement townhouse in construction, we unloaded the house for $739K - a ridiculous price for 3 bedroom suburban home. Paid cash for the townhouse and got rid of the mortgage. Felt super smart.

That house would be worth somewhere between 1.1 and 1.3 million today.

At least the townhouse has gone up 200K! And rents have increased by $700 or $800 / month.
__________________
Going Sailing is offline   Reply With Quote
Old 08-03-2016, 05:19 PM   #4
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
 
Join Date: Jun 2005
Posts: 8,051
Some nice returns were mentioned, but no comparison to a benchmark was made.

I think the US market was returning about 23% a year annualized for most of the time period mentioned in the OP. Give me exact dates and I can look up the returns.
__________________
LOL! is offline   Reply With Quote
Old 08-03-2016, 05:46 PM   #5
Dryer sheet aficionado
 
Join Date: Jul 2014
Location: Vancouver
Posts: 27
Quote:
Originally Posted by LOL! View Post
Some nice returns were mentioned, but no comparison to a benchmark was made.

I think the US market was returning about 23% a year annualized for most of the time period mentioned in the OP. Give me exact dates and I can look up the returns.
The point wasn't really to prove that the fun money was outperforming the market, more to indicate that as the approach becomes conservative, the fun money starts to become a bigger proportion of the overall portfolio and the gains never compound at the rate of return because it makes sense to rebalance.

Time frame was Jan 2011 to July 2016 with TSX @ 9.35 quoted as the benchmark. I live in Canada. Funds are invested in the Canadian market.
Attached Images
File Type: png Screen Shot 2016-08-03 at 4.35.45 PM.png (35.7 KB, 27 views)
__________________
Going Sailing is offline   Reply With Quote
Old 08-06-2016, 07:38 AM   #6
Thinks s/he gets paid by the post
 
Join Date: May 2014
Location: Utrecht
Posts: 1,841
I have a similar emotion going on.

My individual shares outperformed the index, and is becoming a significant part of my total net worth.

Should I keep on keeping on, or rebalance to index? I promised myself I wouldn't (in both cases: under and outperformance), yet here I am pondering.

Good 'problem' to have, regardless.
__________________

__________________
Totoro is offline   Reply With Quote
Reply


Currently Active Users Viewing This Thread: 1 (0 members and 1 guests)
 
Thread Tools Search this Thread
Search this Thread:

Advanced Search
Display Modes

Posting Rules
You may not post new threads
You may not post replies
You may not post attachments
You may not edit your posts

BB code is On
Smilies are On
[IMG] code is On
HTML code is Off
Trackbacks are Off
Pingbacks are Off
Refbacks are Off


Similar Threads
Thread Thread Starter Forum Replies Last Post
Slow to realize.... Tekward FIRE and Money 9 01-02-2014 02:54 PM
That ironic moment when you realize you won't outlive your money nun FIRE and Money 12 04-29-2013 10:34 PM
3M doesn't seem to realize we are in a recession Hamlet Stock Picking and Market Strategy 9 10-22-2008 01:17 PM
"BIG 4-0"BIG 5-0"huh? Donzo Other topics 56 08-05-2006 06:45 PM
Americans save more than we realize? Nords FIRE and Money 9 05-28-2005 09:57 PM

 

 
All times are GMT -6. The time now is 11:12 AM.
 
Powered by vBulletin® Version 3.8.8 Beta 1
Copyright ©2000 - 2017, vBulletin Solutions, Inc.