so your net worth is about 4m at 40? thats actually really good. mad respect sir. why do you still work? i mean your income from investments alone must be half a mil/year. i imagine it is larger than your current income.
also whats the margin rate you are getting? i thought the lowest was ibkr?
Ohai, you should seriously think about investing all your money with me. I’m investing in a seriously mispriced asset class that will throw off 10%+ cash on cash with significant appreciation potential (as capital enters the market and pricing becomes efficient). Risk profile on cash flow is in line with an institutional apartment portfolio and could be argued to be superior.
love the 2x/3x ETNs/ETFs - you prob can get better leverage rates than me but i cant beat what these guys (ETNs) are borrowing at.
imagine owning TQQQ the last 10 years 
QLD is the 2x version - even if you bought at the high point right before the GFC, still made out like a bandit.
Hmm. One of those numbers is too low and one is too high. Anyway, if you want to know, investment income was more than job income in 2017. In 2018, investment income is higher on an annualized basis, but not yet higher in dollar amounts, as I get paid most of my job income in one check at the beginning of the year.
I think it’s hard to choose to retire if you only had $4 million. Your lifestyle in this case is still sub $200k. That’s not bad, but it still puts you out of reach of many experiences. Plus, you don’t have enough money to protect you against many catastrophes. My situation isn’t exactly like this, but the thought process is the same. The nature of your work, and the amount you are paid also matter obviously.
I can’t think of any reason why you would pay the high margin rates charged by most brokerages. However, with index investments, you can also achieve leverage using futures, leveraged ETFs or options.
yea i figured your investments generate more than your work. 4m imo is more than enough. i mean what are you saving for? worst case catastrophy hits you lose half, you still got 2m. and your perfromance moving forward would be much higher than the average.
when you use options, what is the amount of time before expiration. and what is the cagr for the premium. also which index tickers you go for? how do you choose them? is it volume, open int, tracking, etc etc?
And what’s going to happen to those in a downturn?
You can’t think of options in terms of % return on your premium. Do you go around telling people a certain investment has either 1000% or -100% return? You have to think about it in terms of delta of your whole portfolio. So, in other words, if you have $1 million and buy $1 million notional of options with 50 delta, that is the equivalent of having 1.5x leverage on your portfolio at the beginning of the trade (more or less). Also, when you buy options, you are implicitly paying for volatility return, so your total return will be lower in most cases.
Anyway, I don’t have options in my own accounts. It doesn’t make sense to put on leverage, and then pay a risk premium on the extrinsic value of the option - not when the main purpose of your portfolio is to be exposed to the market.
Futures are quite efficient, but you have to do quarterly maintenance, and other margin maintenance. Also, the minimum size of each trade is generally $50k to $150k (one SPX future is about $140k).
For most people, leveraged ETFs are probably the most appropriate, even if they charge generally a 1% fee. They are the easiest to manage and automatically stop you out in a catastrophic scenario.
This is exactly how my first skiing experience is gonna go down!
That’s not true in the slightest. They’re the absolute worst. Take it from me…
Hopefully, you’ve made enough money in other years to make up for downturn. In 50 year+ history of SPX, the optimal leverage has been about 200% (you can backtest yourself if you want). If you held SSO (2x leverage) for the past 5 years, your money would have more than tripled. It would take a major market event to come close to undoing these gains.
Anyway, I was never looking to get rich quickly. Everything I have done has been carefully considered and measured. First, make sure you have enough reasonably protected capital to live comfortably. Anything above that can (and if you are a rational investor with diminishing marginal utility to money, should) be used to pursue higher expected returns with higher units of incremental risk.
Sounds reasonable. I don’t have anything above so I’ll skip 
look at QLD during GFC and after…
I thought Ohai was nuts with the leveraged etfs, since consensus is they are awful for you. But he’s right. I read the papers he mentioned. Now I mention it to other finance people and they look at me like I’m crazy. I was trying to do it with other forms of leverage and they are just inferior
You would have lost most of your capital with QLD in 2008. However, even if you bought this fund at its 2007 peak and held it until today, you would have made more than 18% annualized returns and beat the unleveraged return of 12% by a significant margin. People seem to mistake these funds for short term investments. This is not correct. The longer you hold them, the more likely you are to make money.
Furthermore, QLD has too much leverage, to the point that it starts to reduce returns. You would have made more money with less risk with more modest leverage, or a balance of leveraged and non leveraged investments.
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QLD is for folks that cant get good rates margin or are not allowed to use derivatives or want to de least amount of work.
with all its warts it still beats most things out there.
TQQQ is my go to but was showing folks QLD bc TQQQ didnt exist back then.
when ohai speaks folks should listen - not listening is literally costing you a ton of money.
Tqqq is probably too high on leverage though
Probably interest in a private company, but it hasn’t been marked since inception so who knows. There are plenty of comps, so it definitely seems likely. In liquids, SPY and highly correlated funds. I would expect that’s the case for many here. We’re all part of the Ponzi scheme. Beyond that…house, since I bought in 09 it’s appreciated and is levered 4x from cost. This is a lot of luck as I just happen to be at the front end of the millennial cohort.
At a 5% return, $5M gives you $250k/yr. I’d expect most would consider moving out of day job and taking some risks with human capital from there. Obviously this depends on upside at current job and 5% may be too aggressive an assumption for some.
Ohai what is your assumed growth rate? If spy is 10 percent per year total return, yours would be 15 or 20? Since your way uses leverage and would be superior right?