Fastest path to $1M a year

Hi WSO,

Quant Trader here, 8 years working in HFs and IBs. Experience has taught me office politics, having an edge, ruthlessness of the markets and domain knowledge. 

Four options. Which you think has the highest probability of realising this: I'm on VP pay right now, I want US$1M next year. That's enough for me to live my form of the good life. 

  1. Slog it out in sell-side trading. 1M a year happens via the usual VP -> D -> MD progression. Bad? I probably see it in another 8 years, best case is 6.
  1. Leave sell-side, join MM, deal to get 10% of my PnL. Problem? I hit a draw down limit and I'm out. AND my workable strategy is only 1 asset, in HFT and needs proprietary information. That's tough
  1. Put my cumulative bonus in the public markets. I'm risk adversed by nature and I doubt investing on BBG TOP is gonna beat HF analysts doing research 50 hours / week. 
  1. Objectively, I'm at top 93% percentile of programmers and quants. I got an idea of a need that can be commoditised. Entrepreneurship on the weekends, get 1k paying customers at 1k a year. There's my 1M

I'm leaning towards one of the four. I would like to hear your comments

  • Nijikon

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Comments (58)

  • Investment Manager in HF - Other
Apr 20, 2021 - 10:10am

Well if you are risk averse then 2 also seems like a problem. Fastest path to $1mm is probably 2, but massive risk, chances are you are out before you hit that mark. 

The entrepreneurial path may or may not work. MD is "safest" path, but no thank you  

I'm a bit confused though, if you are in the top ~7% of quants you should already be at that figure. Is the path at your current firm not possible? 

Edit: re-reading looks like you are on the sell side. I'd move buyside, if you get to an established fund and you are that good you should get there much quicker than at a bank. 

Apr 20, 2021 - 10:46am

My friends always comment that I'm too precise and objective on where I place myself in the standings. Let's try:

Top 0.5%: DE Shaw, Renaissance

Top 2%: Those small quant HFs, not covered by media, stacked with PhDs ( Qube, PDT )

Top 4%: Citadel, Jump

Top 10%: Quant at large banks

Practically speaking, what I meant by that comment is that I have the ability to code up a web based application from scratch and release to the market.

And yes, at sell-side, HR tries their best to fit you in a certain scale regardless of your skills and based on your years of experience. As you have alluded to, option 2 corrects that but the one strategy I have conviction in is very specific. And there's the risk. And there's the scalability to 10M ( 10% makes 1M ). And there's lack of a back up plan. Risk adjusted, this option is worse than my current set up

  • Investment Manager in HF - Other
Apr 20, 2021 - 10:54am

Risk adjusted comp is probably worse if you go to a fund, unless you can break into a fund that will invest in your development and is stable enough where you don't need to be a PM/producing alpha immediately. If you position yourself as an expert on the quant side (being able to code, build algos, etc) as opposed to someone who knows a strategy (but rather can learn about different strategies and build them/make them better) you may have a better shot at a reputable fund and a more stable comp path. Some funds will pay a lot for that. 

Apr 20, 2021 - 10:28am

My experience in the HF has taught it many many many people under-estimate how difficult is it to beat the market. Further, I'm looking for absolute returns. Approximately, I'll need to make 100% return in each of the next 2 years. So S&P500 is out. Diversified portfolio is out. What else we got? Electric vehicles? Cannabis? Tesla?   

Definitely not risk adjusted. Possibility is that I inch out an edge in a single name stock. That's gonna take me the amount of time that the HF analysts have and I don't, that 50 hours per week. Unless of course I go with option 2.

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  • Analyst 1 in AM - Equities
Apr 20, 2021 - 10:29am

Entrepreneurship doesn't necessarily reward the smartest guy in the room by any means. So much of it is circumstantial and amazing timing. i.e if Zuckerberg had the same idea and graduated 10 years later, he may only have a 5m net worth.

If you are in the top 7% of quant's wouldn't you be able to land pretty damn close to 1m a year by now? -- Perhaps you aren't quite as good as you say you are. 

Apr 20, 2021 - 10:51am

I meant to say because I'm top 7% of programmers, I have confidence that I'm able to code a beautiful web based application for scratch, release to the market and have paying customers. I did bits and pieces of this before

Also, I'm not remotely looking to be Zuckerberg rich but 1M a year rich. I'm realistic.  

Apr 20, 2021 - 11:06am

You say $1M is enough but I doubt it. I think you'll keep looking for the next best thing. 

Array

Most Helpful
Apr 20, 2021 - 11:16am

You're asking two questions with an inverse relationship:
1) What is the fastest path
2) What has the highest probability

Pick one. 

Just had my trade dispute rejected by Schwab for a loss of 35k. This single issue alone should be a gigantic red flag to anyone who trades on their platform.

If they have a system error, and you do not video record your trading (they actually said this), they will not honour their fuck up. Switching everything away from them. Fuck this company.

  • 5
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  • Prospect in HF - Other
Apr 20, 2021 - 11:46am

fastest way is to go to Colombia, get three bricks of baby powder and flip it on the streets of NYC

Apr 20, 2021 - 12:18pm

Dogecoin

"If you always put limits on everything you do, physical or anything else, it will spread into your work and into your life. There are no limits. There are only plateaus, and you must not stay there, you must go beyond them." - Bruce Lee

  • 1
Apr 21, 2021 - 2:56pm

-

"If you always put limits on everything you do, physical or anything else, it will spread into your work and into your life. There are no limits. There are only plateaus, and you must not stay there, you must go beyond them." - Bruce Lee

Apr 21, 2021 - 1:58pm

Really, beyond a certain point, income isn't the problem, but the difference between income and expenses.  I mean if you're even able to sock away like $45K a year for ~33 years which is less than a typical finance career in time and achieve a solid but not crazy rate of return, say 10% (I've only been investing for a few years so not sure if this is actually long term feasible), you'd have about 10MM dollars which would make it pretty easy to make ~1MM in the market every year without working.

Apr 24, 2021 - 10:41pm

Thanks for your comments. This allows me to share more about my life approach.

Given my current trajectory, it's very likely that I would I get 1M / year when I'm mid 40s. That's well and good. But to me, I want to enjoy that kind of lifestyle / money when I'm young, as in 30s young. Men need something to drive them daily. For me, and I thought long about this after chatting with my friends and looking at their social media accounts, what drives me isn't having kids.

Material angle, I want to drive that nice car, have that nice house. Philanthropic angle, I want time to give free tuition and volunteer in unprivileged homes but know I have that house fully paid off. Purpose angle, I want to be an inspiration to others, someone who built his wealth at a young age so he can focused on more meaningful things in his later years. Like how Leonardo Dicaprio said in the Wolf of Wallstreet, "I choose nobility over poverty any day"

TLDR: I'm young and full of energy now. I need to make, or at least step up the processes to make, that 1M a year now.  

Apr 21, 2021 - 2:44pm

I am yet to see anyone on this forum lock themselves in to a path and actually achieve the end goal. far too many variables. 

  • 3
Apr 24, 2021 - 10:14pm

How about my track record of hard work? I may not be the smartest, top 0.5% of quants I mean, or the most well-connected. But I can brag to be the hardest worker.

- Weeks during which I stayed back 4 hours after working hours every day to voluntarily adjust parameters of a strategy to go from 1.6 to 2 Sharpe

- Go to office during weekends; Sat and Sun

- Put in 200 hours studying GRE in the evenings over 2 months 

- Hours debugging C++ code just because I want elegant software design

The point is that right now, in my 30s with full of energy, I'm 100% committed to put in 40 hours over office time per week over the next 6 months to do something. Ask differently, what is the best trade I can make to short time to long 1M a year?

Apr 24, 2021 - 10:16pm

What were your thoughts with GRE studying? Did you focus on verbal too? 

"If you always put limits on everything you do, physical or anything else, it will spread into your work and into your life. There are no limits. There are only plateaus, and you must not stay there, you must go beyond them." - Bruce Lee

Apr 21, 2021 - 3:35pm

btw on point 4. I think you'd be better off solving 1 million peoples problems who are willing to pay $1 a year

Apr 24, 2021 - 10:07pm

I believe one of the criteria of launching a successful product is to have domain knowledge. Given my years of experience in finance, the product I intend to launch is for institutions. Thus, I am more confident solving a problem for a subset of a subset of the population, that is 10% of the finance group, who can pay a price of 1k a year.

Banks, AM, HFs are dealing in a millions. 1k to them is nothing. But it'll add up for me.

Apr 21, 2021 - 3:57pm

-

"If you always put limits on everything you do, physical or anything else, it will spread into your work and into your life. There are no limits. There are only plateaus, and you must not stay there, you must go beyond them." - Bruce Lee

  • 1
Apr 24, 2021 - 10:13pm

In my experience, they're two ways to a high compensation.

1. Become a trader/PM who's paid a percentage of P&L. This could be a MM PM or prop trader.

2. Start your own company. 

You're not going to make >500k unless you're personally responsible for profits/revenue. Roles that are low risk and make seven figures don't exist. 

Apr 24, 2021 - 10:25pm

Thank you Simons. I'm glad someone from RenTech chimed in.

Yes, I've eliminated the fast track, i.e. VP to MD in 2 years lol, in the bank because I'm novice at the politics game. ( Unless you're telling me sell-side traders can reach MD solely based on PnL and process contributions; discussion for another day )

Between 1 and 2, I've eliminated 1. Briefly, on my workable strategy, I'm looking at 3M a year given I have a proprietary data feed with legal parameters, HFT infrastructure, and narrow spreads. Millennium can provide the last two, but maybe for the first. And even if I deal with them, 10% of 3M gets 300k. Add a base of 200k, still not 1M. And this is assuming the macro factors / market factors go in my favour. 

Does my reasoning give credence to 2? Also asked previously, if I'm gonna short 40 hours a week, long 2 better than long 1?

Apr 25, 2021 - 11:56am

The fastest way is to develop a strategy that you can apply in the cryptocurrency markets. I have a buddy who's a quant at a big insurance firm that I've been trying to convince to do this but he hates crypto.

Would look into yield farming. Lots of smart people doing this, but without the background to build a system around it

Apr 25, 2021 - 1:11pm

My advise would be to do some deeper soul searching. You come off as extremely materialistic, and that is fine - whatever floats your boat...but in my experience, the materialistic part wears off pretty fast. Once you've driven a couple of nice cars, lived in some nice houses, and taken some nice vacations, it's not all that hot anymore. Sooner or later, everything becomes a routine. 

If you want to become a philanthropist and role model, that's excellent - it's a good calling. But I honestly don't see any good reason to stress for that, whether you're 30,60, or 90, is pretty irrelevant for those receiving the help.

I think that if you truly want to become as rich as possible, then entrepreneurship is the way to go. Sure, you could hit jackpot with some ridiculous investments, but entrepreneurship is a good path. You have more skin in the game, for whatever you're working on, and it's easier to be passionate about something that's deeply connected to yourself. With that said, it's a lot of luck and hard work.

Apr 26, 2021 - 5:59am

Let me know what you think about this. Gonna disclose personal stuff here but it's okay, I appreciate the WSO community in that they've given me lots of good advice before

I've been doing soul searching and I think I know what's my thing. My personal dream is to one day perform to a sold out audience at Lincoln Centre. I did music before I got into finance. On some days, after market hours, I walk home and yearn for that sense of fulfillment, joy and accomplishment I'd feel after playing that 2 mins bass solo with the drums accenting the down beats and the piano intermittingly doubling my melodic licks. People in the crowd look at me and say to themselves "That's good, I'm inspired." What a feeling! 

Ok, back to reality. Clearly, time at the desk has left my playing skills wanting. Realistically, I can achieve my dream in 6 years with consistent hours of practice everyday. But, and I know myself, if I were to embark on this musical regiment now, I will always be thinking: what's the next trade, what model is gonna give more PnL and more relevant, how to fill this mortgage faster, what can I do NOW to alleviate some of my financial obligations.

Thus, I've created my path. I can't do both. While I believe I can still perform well in my current job during that mandatory office time, I CAN'T practice maj7#11 scales AND not worry about that house loan. Instead, I want to set my life in order first, in the financial sense, and then think of Lincoln Centre. The timeline: next few years getting there, all years after at that ok job and work on music 

If my aspirations sounds similar to that of a rather well-known quant in the street, you're right. What Peter Muller did, MS, PDT, released a few records, then back to PDT, is what I would like to emulate. I'll put Muller at the top 0.5% of quants though

Apr 26, 2021 - 12:20pm

This is how I feel about OPs replies too. If you don't have dependents though, there's actually very little risk. You can always BK if you fuck up badly.

  • 1
Apr 27, 2021 - 8:03pm

you want $1MM comp, the quickest way is running a book with % of PnL...you're right if you mess up...you're out. One thing to remember is how many people have you seen take a loss and get fired, only to get rehired with a guaranteed comp running even more money. You can't win the lotto if you don't buy a ticket...

Apr 28, 2021 - 9:05am

They say the first million is the hardest...

I'm finding that to be the case.

heister:

Look at all these wannabe richies hating on an expensive salad.

https://arthuxtable.com/
Apr 28, 2021 - 10:00am

1) put all your savings 50/50 into Polkadot and Chainlink - this will be the next crypto wave over the next few years

2) goto a MM hedge fund, where you will get 200k base salary +15% of your P&L (and employ a couple friends while ur at it).  Worst case, if you flame out the details will remain a secret, you can try again at another MM hedge fund....can probably do this 2-3 times...and then as a fallback, go back to a bank if the hedge fund route doesn't work out.

just google it...you're welcome
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