tag:blogger.com,1999:blog-22517597.post8319988121188852184..comments2024-03-03T11:13:39.377+11:00Comments on Moomin Valley: How Could I Produce an Alpha of 9%?mOOmhttp://www.blogger.com/profile/03440274434662150925noreply@blogger.comBlogger4125tag:blogger.com,1999:blog-22517597.post-70872469161365973502008-04-12T22:03:00.000+10:002008-04-12T22:03:00.000+10:00I did the analysis using Australian Dollar returns...I did the analysis using Australian Dollar returns for myself and the MSCI. Alpha is lower as expected at 7.2%. The main puzzle is that it hasn't increased as much over time as the USD based ones - they show negative values back in the 1990s while the AUD one was positive then already.mOOmhttps://www.blogger.com/profile/03440274434662150925noreply@blogger.comtag:blogger.com,1999:blog-22517597.post-59272916861331163842008-04-12T20:01:00.000+10:002008-04-12T20:01:00.000+10:00Anon - Soros, Simons and the like returned 35% a y...Anon - Soros, Simons and the like returned 35% a year. That was after their fees. So I'm not aiming anywhere near that.<BR/><BR/>Chris - very good comments. I earned $US75k in my last year as a professor. So it is a pay cut. I doubt I'd make $US75k right away here though. I plan at the end of this first year to assess my forward direction. My wife is of course working at the moment. I've actually been thinking of doing an analysis in Australian Dollars and did some preliminary calculations - I'll have to do that now :). Another factor that is probably having an effect is the money I expect to inherit and which I've discussed on here my role in managing. If I include that, my net worth is 4 times higher. I think close $2 million currently in total is certainly a good number given our modest lifestyle ambitions. I don't need $4 million. Yes, there is no guarantee on that number but it allows me to take a little more risk now to see what can work out. At the end of this first year I will reassess and decide what I want to do going forward.mOOmhttps://www.blogger.com/profile/03440274434662150925noreply@blogger.comtag:blogger.com,1999:blog-22517597.post-91775256693901487162008-04-12T09:42:00.000+10:002008-04-12T09:42:00.000+10:00In your shoes, I'd be asking myself two questions:...In your shoes, I'd be asking myself two questions:<BR/><BR/>1. What is the opportunity cost of alpha? If you ahceive alpha by being a full time trader (at the cost of a regular job), then you need to benchmark it as appropriate. If I was in your shoes, and I could make $40k/year of alpha, that would be a pretty poor trade-off against my $100k salary. Indeed, a $60k/year worse trade-off. Perhaps you should be benchmarking against the MCSI and the opportunity cost of your time?<BR/><BR/>2. You were very fortunate in the timing of your return to Australia. Currency effects over this period have significantly offset your losses in USD terms. However, this is an impact that you are unlikley to repear with good timing, and a change that had significant other costs (costs of moving). I would be very wary of using this period for forward predictions of my future peformance.<BR/><BR/>Those two things said, I'm impressed by your confidence in effectivley withdrawing from the workplace with a portfolio of ~$430k. I'm intending to have about ten times this before I feel connfident of taking the same step.Bigchrisbhttps://www.blogger.com/profile/13948410395168741379noreply@blogger.comtag:blogger.com,1999:blog-22517597.post-70582161180946297662008-04-11T22:05:00.000+10:002008-04-11T22:05:00.000+10:00Given a long-term average return on stocks of 10% ...Given a long-term average return on stocks of 10% or so, you think you can add 9%?<BR/><BR/>So you can average 19% per year? Highly doubtful, I would say. It can be done, but not very many people have managed it over the long term. That's up there with Soros.Anonymousnoreply@blogger.com