Is there a career for me in this field?
Here is my story. I am in my late 30s. I worked the last 15 years as a data analyst in a scientific field and was recently laid off. I could find work in the same field if I wanted to but thought this might be an opportune time to consider a career change to something I am truly passionate about - investing.
Over the past 15 years I have also actively managed my own investments. My portfolio is now large enough that it is becoming worthwhile to dedicate myself full time to managing it. I trade stocks and options (long and short, on domestic and foreign exchanges). My return in 2011 was over 200% and my return in 2012 YTD is over 20%.
My investment career has been a gradual learning experience. I have no education in finance and for the first several years I was basically investing blind and lost money every year. I started reading Lynch, Buffet, Fisher, Graham, etc, and my returns improved. The last several years I have focused on what I know best and all my experience seems to be paying off as I have been handily outperforming the markets. I went from not knowing how to read an earnings statement to being able to build my own financial models for the companies I invest in. That gives me confidence that my performance of recent years is the truer reflection of my ability.
I have maintained a blog for the past couple of years where I post my trades in real-time and write in-depth reports on my analysis. I have made some contact with professional fund managers through my blog and received praise from them for my work.
So that brings me back to my original question. Is there a career for me in this field? With no formal education in finance do I even have a chance at a job? I have read some of the job postings for traders and am not interested in anything where I have to produce quarterly results - that is not my investment style. Is the only answer to start my own fund? I have read up on this and the process seems straight-forward enough, but honestly I do not have much of a network and am not sure how I would go about finding people to invest in my fund. I will broach the topic with some of the contacts I have made through my blog, but I discovered this forum and thought I might solicit some ideas here first.
What is your 5 year record?
What is your 5 year record? It's easy to have a great year (and, inversely, to lose everything) when options become involved because they give you such enormous leverage. But if you can truly generate that kind of alpha on a regular basis, wouldn't it make sense to just continue to compound your portfolio?
Also, have you considered getting an MBA? The columbia value program might make sense.
I averaged around 30% per
I averaged around 30% per year from 2008-2010. My high returns the last several years have been possible because I was working with a small(ish) amount of money. I usually hold no more than 5 different stocks at any given time. I like to take highly concentrated positions in my highest conviction ideas. If I have no high conviction ideas (I set the bar pretty high because I value preserving my capital) I will just sit in cash until I find some.
I use options sparingly - I keep the initial amount invested to no more than 10% of my portfolio. But when I have a super high conviction idea I will sometimes supplement my shares with options in an attempt to juice returns even more. And when I use them they are generally longer expiration options (like LEAPS or warrants) and I buy them only when I think the underlying stock is at or near very strong support. That way I limit my risk by having limited downside in the underlying and plenty of time to sell the options long before expiry to recoup some of the premium if my investment thesis does not play out as I expect it to.
My 2011 return was anomalous and was due to finding a small cap stock which had been forgotten/ignored but just at the right moment when my research indicated sales of its products were exploding so I took a huge position in them and was rewarded when they reported earnings. I sold when the market expected such growth to continue but my research indicated that the company's sales momentum had slowed.
Just continuing to manage my portfolio is one possibility. I just thought I would explore all my options. I guess having worked a regular job for so long I feel as if I should have one. Excuse my dumb question but is the Columbia value program you mentioned value as in value investing, or value as in lower cost of education? At any rate, at this point in my life I am not real excited about the idea of going back to school, spending the money, and more importantly the time it would take away from my trading/investing.