How to get into Banking Part 2: "Run Your Own Personal Money"

AndyLouis's picture
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This article "How to get into banking - and WSO myths" was posted onto Reddit last night and got a few good responses, this one in particular:

From user i-cjw:

I keep making this comment, because it's true:
You want to stand out in the finance job market? Run your own personal money. I swear, of 100 resumes that come across my desk, less than 1% demonstrate and interest and willingness to back their confidence with their own cash. That to me is the dividing line between those with real passion and ability, and those for whom investment is just about wearing nice suits and getting paid without taking risk. He/she may not get the job, but 100% of the time I will interview the guy whose resume came with a research note they wrote or list of recent trades & short description attached.

Question from user QuoteOfTheHour

Could you be more specific? I built a portfolio over the summer, and will be applying for internships during a finance convention soon. Should we mention our holdings in a separate document? Or attach an official record of our portfolio? Thanks

Response from user i-cjw:

Brevity is the key! One page max in addition to your resume. A small chart & a couple of bullet points on each significant position (investment thesis, outcome, lessons learned). Include losers as well as winners. Metrics, metrics, metrics - what was the PE/Div/ROE when you invested, where is it going & why? Maybe add "Investment models & full notes available upon request" at the bottom, take those models & notes along to the interview, and be prepared to talk about them.
Is it real money, or paper? If real money, then by all means mention the invested amounts - no-one's expecting you to be running a $2bn portfolio, what matters is that the amounts are significant to you at your point in life. Didn't make positive P&L? Not such an issue - personally, I'd prefer my hires to have made their mistakes and learned from them before they come to me. Be candid about your mistakes, and pro-active about how you've changed your approach as a result.

Comments (13)

Dec 3, 2012

Interesting read. Many people on this site really put down paper trading and real money trading (for small accounts) on your own as experience. Its nice to hear the other side of it. The general opinion here has been, "anyone can make 150% returns on paper accounts or a small $1000 account." Yet I've never understood this reasoning as it has not been backed by anything but their opinion.

Dec 3, 2012
yeahright:

Interesting read. Many people on this site really put down paper trading and real money trading (for small accounts) on your own as experience. Its nice to hear the other side of it. The general opinion here has been, "anyone can make 150% returns on paper accounts or a small $1000 account." Yet I've never understood this reasoning as it has not been backed by anything but their opinion.

Okay, I'll give it a shot. Most people use paper trading accounts for stock competitions, or just to see if they can turn $1MM into $5MM. Since there is zero risk involved, they probably trade triple leveraged ETFs, penny stocks, and options with ridiculously low percentage strike prices. Basically, the trading strategies used with fake money differs tremendously from those with real money.

I just see a 15% annualized return with real money as more of an impressive feat than 150% with a paper trading account.

Dec 3, 2012
yeahright:

Interesting read. Many people on this site really put down paper trading and real money trading (for small accounts) on your own as experience. Its nice to hear the other side of it. The general opinion here has been, "anyone can make 150% returns on paper accounts or a small $1000 account." Yet I've never understood this reasoning as it has not been backed by anything but their opinion.

I guess the reasoning is that in order to make 150% annual returns, you have to take on more risk. The only way to make a huge return is by making a bet not many are willing to make. You are a big contrarian by taking such bet. And it is easier to make a big bet with "paper money". When you have real money on the line, you are less likely to go on with the bet. I for one can give myself as an example. I usually don't touch options because I know that you can lose it all if the options you buy are out of the money at expiration date. I know I could make better returns, but I stick with pure stocks just because of this. You can easily make an option bet and make 150%, but you can easily come out at 0% too!

Dec 3, 2012

The reasons having your own trades is helpful is that it creates a set of companies that they can reasonably expect you to be smart on and thus constructively grill you on them. This is vastly preferable to being grilled on a random company in your industry, which you may not know that much (or more dangerously, just enough to sink yourself) about.

Dec 3, 2012

@BTbanker & @andres17

Both of you make excellent points and I do not disagree with you. You are much more willing to take a sizable risk with money that means nothing to you. However, let me play the other side here.

If someone were evaluating your paper account based on what you have said, then would someone who hasn't taken huge risks on options trades benefit or would a paper account still hold little to no value? If someone has merely returned "15%" on long/short trades that show consistency with their risk levels as well winners and losers.

And as the original post stated, tie in investment reasons to the trades and would you then be creating value to your background? While entirely agreeing with you both on all of your points, at what point does paper trading hold benefit?

Dec 3, 2012

I mean I feel like anyone boasting returns gives no true value, 15% return in a market that is averaging say 20% is terrible. Also paper trading is just a load of shit, you learn nothing until you put up your own money. You may buy a penny stock with the hopes of getting a 1000% return but if it was not real money then I bet you would have reconsidered buying it. On my resume I just list the amount of money that I personally manage (>50,000) and list what I have learned and what I actively do with my portfolio. Although my time weighted return for the past five years is probably in the realms of 5-7% over the market average I do not list that, but more talk about what I have truly learned though the process. I also bring a copy of my actual portfolio to my interviews, not sure if this is the best strategy or if I should submit it with my resume. Any thought on this? With that said I realize that not everyone has the ability to invest a lot of money if they do not have any, but boasting you outperformed the market by 50% annualized in a paper trading account is a joke.

Dec 3, 2012

The best way I have seen this done is TICKER (entry-exit, % return). Most people following the markets can ballpark the S&P and relevant industry indices over the time period well enough to get an idea of the performance.

Individual trades over cumulative returns. I would put total capital amount if its a respectable as an absolute # or a decent amount of your net worth. Again, the idea is to throw names out there to talk about, ideally ones you know very well.

This is basic long, maybe short equities. For FX, you could probably use similar format. For rates or vol driven options trading, I have no idea, but in that case you will talk more about underlying principles than specific investments.

Dec 3, 2012

Funny thing is, I just started my own portfolio after i earned a little money during my internship this past summer and I was thinking about putting that down on my resume but since it's little money and I only have 8 positions (approx. $5K invested) i thought that would make me a laughing stock.

I'd like to hear more inputs.

Dec 4, 2012

How about starting your own retail/wholesale business online? Is this viewed the same way?

Dec 4, 2012

Paper trading isn't as legitimate for a few reasons. One reason is you can make an unlimited number of accounts and try different strategies, and simply display the most successful one. It's a relatively safe assumption that one month from now the S&P will either be +5 to 10% or -5 to 10%, could easily make two paper portfolios and just showcase the successful one.

Another reason is they're somewhat easy to cheat. Most of them don't get too technical as far as dividend distributions, so if you put one-day shorts on stocks on their ex-date you can get huge fake returns, especially on high dividend stocks. Shorting a MREIT like NLY or AGNC on their ex-date will get you 3-4% every time you do it. With real money you can't do this, because you would owe the dividend payments to the broker you borrowed the shares to short from.

Dec 4, 2012

so what should somebody with 0 dollars to do this with do? just start a paper trading account, try to learn as much as possible, then try to explain what I've learned in interviews?

If your dreams don't scare you, then they are not big enough.

"There are two types of people in this world: People who say they pee in the shower, and dirty fucking liars."-Louis C.K.

Dec 4, 2012

Be cash-neutral by shorting first and using the proceeds to be long?

Dec 5, 2012
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