This article explains why market orders are bad when low liquidity asset or large order.
Fighting drawdown via aggressive timing
Our main portfolio should be by default diversified and low volatility, basically buy-and-hold type. However we may get long drawdown periods in the main portfolio. To fight the drawdown we use further diversification into yet more markets and cache assets. However all assets are correlated to some extent. To fight this correlation we can use …
How to pick REIT
There are many real estate sectors with varying sensitivities. Picking individual REIT is as tricky as picking a stock, or more. Here is an example of due diligence. And here is a cool list of some REITs. A different REIT combination is here… There is a mild indication of REIT issues ahead of us…
Fortifying market-neutral position
While long-term equity positions are probably the most lucrative positions to hold, they are most prone to luck of market entry. There have been years in which the market did not recover from a systemic event. Consider Japanese markets since 1980-s… There are also large regulatory shifts and events that can modify the market. Therefore …
Portfolio management
Currently the best tool we could find for portfolio management: http://www.investspy.com/calculator This is a free tool with registration. Typically well-balanced portfolio gives ~10% above plain vanilla SPY Example of diversified low risk ETF-only portfolio suitable for IRA ~50k$ allocation [no international, commodity, leveraged]: Ticker Portfolio Weight Risk Contribution Annualized Volatility Beta Daily VaR (99%) Max …
Trading vs investment
This post is more “we believe” than something backed up by numbers. It is easier to make money if trading is limited, however the temptation is too high to give up trending altogether. Trading potentially offers higher returns, but it is very high risk endeavor. It is better if swing or day trading is a …
Choosing the right bank account
Unlike the conventional trading wisdom, in reality our accounts are highly variable: 1. Income: we add (or remove) savings into account of choice every month 2. IRA: the IRA accounts are limited by regulator, taxation and account maturity limitation. It makes sense [taxation-wise] to keep IRA account for ETFs with zero risk of ruin and …
Choosing the right analysis methods
We have 4 predominant approaches to market analysis: 1. Common sense: Choosing the right blend of assets in the first place, buy with discount, not getting greedy, see where the market is going. 2. Psychological: Seasonality, Elliot waves, support/resistance, dead cat bounce, retail investor behavior, algorithmic slippage. 3. Fundamental: Accounting ratios, long term indicators and …
Rebalancing
To reduce the psychological pressure, we do not want to modify the amount of money committed to investment beyond the monthly saving/using rate. Instead we use rebalancing tactics. The idea is pretty simple. If we have a portfolio of assets, we could improve the alpha of the portfolio (risk-adjusted reward) by combining uncorrelated bets. If …
Time scale and risk element
We assume that the readers are disciplined and trust statistical tools. Furthermore diversification and tracking enables some higher risk tolerance. The factor that limits diversification is ignorance. The highest risk element is the trader’s psychology. Various personal biases cause illogical trade decision. To remove the psychological element we limit time scale exposure (opposing trends), and …