Made 750k In The Market - What Now?

Posted this in the IB forum too, but figured I'd give the hedge funders a try.

Made a few highly speculative investments since the crash, the latest which basically involved me YOLO'ing my life savings from banking into a hyped up SPAC which proceeded to go ballistic. Conservatively I estimate I'll be able to double my position which has appreciated to 750k, I'm still invested in the SPAC, and pull out $1.5mm in ~one month if the floor doesn't fall out from beneath the market. If I get lucky I'll pull out $2mm.

My biggest question is what next? Believe it or not I'm not a huge risk taker but I decided to speculate due to educated extrapolation and pretty much my intuition / gut feeling. If I get to around $2mm, should I keep going to see how far I can take it? There are so many generational companies going public in Q3 - Q4 and the market is on literal fire, it's like shooting ducks in a barrel. Insane IPOs coming to market include Robinhood, Doordash, Snowflake, Airbnb, Unity - and these are just a few off the top of my head. I think if I keep opportunistically trading in and out of the market on very strong momentum stocks, I don't see why I can't double up a few more times and potentially see if I can get my net worth into the low 8 figures.

I've been in banking for 4+ years and am basically completely bored / coasting through at this point and probably not masochistic enough to gun for making MD. I'm a highly respected top bucket associate in my group but not sure if people know how bored I am with banking in general. I'd probably quit if I was able to get to get to mid-to-high 7 figures.

 

What would you do if you were me?

 

Comments (115)

 
Aug 30, 2020 - 9:08pm

Don't forget about taxes.  Unless you end up holding for a year to receive LT capital gain treatment, your gains will be taxed at your marginal income tax rate which could be close to 50% if you're getting paid in typical IB associate level comp.

 
Funniest
Aug 31, 2020 - 8:16pm

I think you should look at diversifying your holdings with something a little different. Did you know you can purchase the rights to large infrastructure such as bridges? If you're serious I can connect you with an individual who's looking to exit his investment in the Brooklyn bridge for example. The cash flows you can get from the tolls on such a bridge are pretty hefty. Hit me up if you're keen and I can walk you through the numbers in detail. 

 
  • Research Analyst in PE - Other
Sep 1, 2020 - 1:11am

Can't tell if you're trolling. 

Is this how quants joke?

  • 3
 
  • Associate 1 in IB - Ind
Sep 1, 2020 - 11:27am

Thanks for trolling me, but if I can grow my capital base to close to ~$10mm I may give some thought to soliciting another one or two GPs to pool capital into an investment vehicle. I'm obviously not a professional money manager so would probably largely defer to the GP(s) and split the economics. If we can establish a decent short term track record maybe we can pursue a fund raise via LPs. 

 
Sep 1, 2020 - 4:54pm

How do L/S equity teams at large multi-manager hedge funds make investment decisions and come up with ideas? How do they do their research? What is the time frame? Do they try finding companies that will beat earnings before the announcement and then sell them after the call? If so, how do they find companies that they think will beat earnings? Responses will be greatly appreciated.

 
  • Associate 1 in IB - Ind
Sep 1, 2020 - 5:56pm

Hey bros just checking back in here with an update. Milestone achieved today - cracked the big millie. Baring a meaningful market hiccup, I think my base case exit has been revised upward to $2.0mm.

For all those that are actually emotionally invested in this like hominem or those that think this is a troll job, I'll post a screenshot after I sell my warrants. Cheers.

 
  • Research Analyst in PE - Other
Sep 1, 2020 - 7:45pm

I can't even imagine the kind of high you must be on rn.....

  • 1
 
Sep 3, 2020 - 3:37pm

Hello, you seem to be in same position as me. I turned $1k into $2.6mm. Proof is below. My question is why is everything down today and secondly do you think we should exit into treasuries or double down? Let me know your thoughts, happy to expand more into my positions if you share yours and maybe we can share ideas in future. Thx.

 

https://vm.tiktok.com/ZMJSrt8FV/

 
Sep 3, 2020 - 6:03pm

If I ever had to flag a post on here for a signal for a market top this was it.

 

I am a shit momentum trader.  But I know a few friends up 1200-2000% in the past few months. With 8 figure personal account profits.  Not my cup of tea - damn being a guy trained in rates looking for cash flow and not a yolo trader.  Weird my portfolio does nothing for months and loses nothing today.

 

Be careful.  Tech can correct a lot more still.  But negative real rates can definitely get more yolo.  But I would agree with Jim Cramer that the solid institutional bid for tech is probably 10-15% lower.

 
  • Associate 1 in IB - Ind
Sep 3, 2020 - 8:19pm

Why is it "the top", just because people are speculating and making money? People have always speculated and made money in every bull or bear market. If anything, I would argue we are currently in the early stage of a new supercycle bull market . Reasons why:

1) People are generally as knowledgeable as ever about the wealth creating effects of investing in the stock market, and believe it or not the recent influx of retail investors is a positive development. It is clear that millennials believe in the integrity of the markets and are eager to put their savings to work in order create wealth. Faith and confidence in the markets begets more participants and more faith and confidence. Yes, there may increasingly be periods of speculation and generally more market volatility, but this has always occurred in cycles. 

2) Millennials are entering the peak earnings years in their careers. There is a massive transfer of wealth currently occurring and millennials are now the largest working demographic in the US and beneficiaries of this transfer. Something similar happened when baby boomers entered their peak earnings years in the early 1980s; we had two of the strongest bull markets ever from 1982 - 1987 followed by the massive rally from 1987 - 1999.

3) Accommodative monetary policy is here to stay in the absence of any meaningful inflation, a weak labor market, and still fragile markets. We're likely at the very minimum two years away from the Fed raising rates. Investing in equities is still the best alternative among cash, fixed income, and real estate asset classes.

 
Sep 4, 2020 - 8:32am

Markets don't just go up.  They go down to.  Didn't call an absolute top.  But near term felt like a top because this was the behavior that is typical of near term tops.  

 

But also valuations were getting absurd.  Apple was trading at a 3% earnings yield and they have been growing earnings around 4%.   They are already huge so growing much above 4-6% would be very difficult.  so buying apple here you get a 7% total return.  And they have real regulatory risks.  And thats not even talking about the absurd valuation of tesla.

 

Markets rotate.  Value stocks are at all time record valuation gaps to growth.  some times the boat just gets too many people on one side of the boat and it can't go up anymore.

 
Sep 4, 2020 - 10:29am

Why is it "the top", just because people are speculating and making money? People have always speculated and made money in every bull or bear market. If anything, I would argue we are currently in the early stage of a new supercycle bull market . Reasons why:

1) People are generally as knowledgeable as ever about the wealth creating effects of investing in the stock market, and believe it or not the recent influx of retail investors is a positive development. It is clear that millennials believe in the integrity of the markets and are eager to put their savings to work in order create wealth. Faith and confidence in the markets begets more participants and more faith and confidence. Yes, there may increasingly be periods of speculation and generally more market volatility, but this has always occurred in cycles. 

2) Millennials are entering the peak earnings years in their careers. There is a massive transfer of wealth currently occurring and millennials are now the largest working demographic in the US and beneficiaries of this transfer. Something similar happened when baby boomers entered their peak earnings years in the early 1980s; we had two of the strongest bull markets ever from 1982 - 1987 followed by the massive rally from 1987 - 1999.

3) Accommodative monetary policy is here to stay in the absence of any meaningful inflation, a weak labor market, and still fragile markets. We're likely at the very minimum two years away from the Fed raising rates. Investing in equities is still the best alternative among cash, fixed income, and real estate asset classes.

This narrative that the influx of retail money is driving price is so blown so out of proportion. Their trades are peanuts relative to institutional volume. 

 
Sep 4, 2020 - 12:38pm

there is a high likelihood you will lose all your money or big portion of it in the long term if you are not careful. speculating with life savings is for a person who should gamble in a casino (seems since they are closed, markets are the YOLO place to go). If I were you, I would grab couple of books on value investing , read them, and put my money in strong balance sheet companies selling at cheap price and ride it for the long term. you have made good money, why lose them all with this attitude? 

 
Sep 4, 2020 - 12:43pm

baystreet_kingpin

there is a high likelihood you will lose all your money or big portion of it in the long term if you are not careful. speculating with life savings is for a person who should gamble in a casino (seems since they are closed, markets are the YOLO place to go). If I were you, I would grab couple of books on value investing , read them, and put my money in strong balance sheet companies selling at cheap price and ride it for the long term. you have made good money, why lose them all with this attitude? 

I invest for the long term with Warren Buffett approach and sometimes using Tactical asset allocation. so far has worked for me. Also , I am constantly following what is going on among new investors (r/wallstreetbets etc)  and I can tell you they are a lot of people who is YOLOing like you do and many will blow up. It is better to get out while you are ahead. You live to see another day. You have made a great return and mostly it was due to luck (like winning lottery or in casino). Take it and now is time to become an investor with that money. 

 
Sep 4, 2020 - 1:40pm

Well, there are some nuances to that statement. nothing is free. if value investing worked all the time, there would not be value investing left. if there is still value investing, it means certain stocks are underperforming. Just value investing is not something everyone should do, there are some strategies you can deploy (TAA) and take an advantage of certain shifts in the market. But buying something that you think is selling at a discount than what it should be worth( the latter part is quite subjective) wont die. What matters is you get the latter part's value as correct as possible.  

 
Sep 4, 2020 - 4:37pm

Covid been the big factor causing value stocks to fall since most of them have cyclical risks.

If you are a rich kid then go ahead and yolo. I have a friend with a 50 million trust fund who turned 1 million to 17 this year yoloing.

If you aren't it's probably not a bad time to move half your gains into value and diversify.

Throw 300k into reopening stocks. 200k into safer balance sheet stuff with dividends.

That's probably throwing things like citi, gs, Nordstrom's in the value reopening bucket. And then some coke and jnj for safer. Maybe 100k in corporate credit. That way you have a little non gambling bucket.

 
Sep 4, 2020 - 6:10pm

Isn't it against policy to speculatively trade while you're working as an investment banker? I thought this was against regs...?

 

Anyway, nice story. As far as doubling up again I wouldn't count on it. Might be a good time to talk to an attorney, take some of the speculative cash off the table, diversify some and let some ride.

"Out the garage is how you end up in charge It's how you end up in penthouses, end up in cars, it's how you Start off a curb servin', end up a boss"
 
Sep 11, 2020 - 2:32pm

Sounds like you're heavily in options. Assuming you're making around 6 figures in IB, you're going to need to pay short-term capital gains while in an already high tax bracket. I think we would need to know more about how you're investing (i.e. options or regular trades, have you already cashed out, etc.) to provide any legitimate advice. There are too many moving pieces and ambiguities to really help you out much based on your original post.

 
  • Associate 3 in IB - Gen
Sep 11, 2020 - 4:11pm

There are only a handful of SPACs that have have been hyped up and trade like animals: Nikola, Draftkings and Tattooed Chef. If you're holding warrants in either I would sell quickly.   

 
Sep 13, 2020 - 7:22am

Hi, I can help you create a hedge fund structure for 50k. So that you can continue your investments in those LLC/LP and have a auditable track record and then be ready to raise funds, when the time comes. I'll also help you figure out the taxes.

Would really love to be of service.
Thanks

 
  • Research Analyst in PE - Other
Sep 18, 2020 - 2:08am

My guy $1M is a lot of money....but still a brokerage account at the end of the day.

You can't run a HF with $1m in AUM.

 
  • Intern in IB-M&A
Sep 18, 2020 - 2:15am

I think you should look into setting up a family office. 400k after taxes is a crazy amount of money- shit your set for life, for retirement. The real question is now planning your estate....

 
  • Analyst 1 in IB-M&A
Sep 21, 2020 - 2:54pm

I'd love daily PA updates if that's something you are interested in providing OP :)

 
  • Associate 1 in IB - Ind
Sep 21, 2020 - 4:54pm

Despite these past few weeks of market volatility, still holding strong, actually, near my all-time high and currently at $1.125mm. 

The reason is that the reverse merger is closing next week (probably gave away the target, w/e) and thus there is investor buyin / momentum ahead of that catalyst. It may sell off somewhat after the deal closes, but because I'm invested in warrants rather than stock, I'm still estimating 50%+ upside from here. 

The warrants are trading substantially below their intrinsic value (stock price less exercise price) because they can't be exercised until 30 days after the deal closes and there is currently over $10 of warrant arbitrage. I expect the gap to close in about a month and for the warrants to split whatever arbitrage gap there is with the stock (warrants go up, stock goes down).

 
  • Research Associate in HF - Event
Sep 21, 2020 - 10:34pm

ah Mr. WallStreetBets shows his face on another forum to ask for advice on how to manage his million dollar SHLL portfolio

 
Sep 28, 2020 - 4:25pm

I'm not a huge risk taker but I decided to speculate due to educated extrapolation and pretty much my intuition / gut feeling

 This has to be a troll... or someone who doesn't know the definition of 'risk'. If its not a troll, congratulations; what is your gut telling you to do now? Take profits or double down?

 
  • Research Associate in HF - Event
Oct 8, 2020 - 8:07pm

Congrats on all your success, really happy to see you completely exited a million dollar single stock portfolio gracefully before HYLN went from 50 to 30 and also avoided short term cap gains along the way! For all who didn't know, he also put all his money into GME calls "tax free" (I believe he has a special plug to do 1031s with stocks, I PM'd him willing to pay to teach me but he said no) and is now sitting on two million dollars!OP's GME gainZ

 

 

 
Nov 12, 2020 - 8:55pm

If you get up to 2M, then I would look at diversifying out. The way the market is going, it is due for a correction sometime soon. You can never go wrong buying some gold (real gold that you store in a vault). The gold will always appreciate in the long run and it is an excellent way to hedge against market and currency declines. Also, maybe think about getting into some real estate as well. 

 
  • Research Associate in HF - Event
Dec 26, 2020 - 7:17pm

Associate 1 in IB - Ind

Posted this in the IB forum too, but figured I'd give the hedge funders a try.

Made a few highly speculative investments since the crash, the latest which basically involved me YOLO'ing my life savings from banking into a hyped up SPAC which proceeded to go ballistic. Conservatively I estimate I'll be able to double my position which has appreciated to 750k, I'm still invested in the SPAC, and pull out $1.5mm in ~one month if the floor doesn't fall out from beneath the market. If I get lucky I'll pull out $2mm.

My biggest question is what next? Believe it or not I'm not a huge risk taker but I decided to speculate due to educated extrapolation and pretty much my intuition / gut feeling. If I get to around $2mm, should I keep going to see how far I can take it? There are so many generational companies going public in Q3 - Q4 and the market is on literal fire, it's like shooting ducks in a barrel. Insane IPOs coming to market include Robinhood, Doordash, Snowflake, Airbnb, Unity - and these are just a few off the top of my head. I think if I keep opportunistically trading in and out of the market on very strong momentum stocks, I don't see why I can't double up a few more times and potentially see if I can get my net worth into the low 8 figures.

I've been in banking for 4+ years and am basically completely bored / coasting through at this point and probably not masochistic enough to gun for making MD. I'm a highly respected top bucket associate in my group but not sure if people know how bored I am with banking in general. I'd probably quit if I was able to get to get to mid-to-high 7 figures.

What would you do if you were me?

Do you know that there are legal ways through which one can eschew capital gains taxes entirely? If you are an investment professional who's also managing your own portfolio, might I highly recommend consulting with an experienced financial advisor that will help you plan your estate.

Separately the value of my investment is now over 800k with a very low cost basis, so I would indeed prefer to save hundred of thousands in taxes. As I mentioned in OP, base case will probably result in a $1.5mm exit with 7 figures in capital gains.

I'm not, and it's definitely not skill. But the market is basically in a short-term state of euphoric mania with as much speculation as there ever has been and is very loosely, if at all, tethered to any fundamentals. The set up is ripe for continued speculation, until the music stops. Surely you agree?

Thanks for trolling me, but if I can grow my capital base to close to ~$10mm I may give some thought to soliciting another one or two GPs to pool capital into an investment vehicle. I'm obviously not a professional money manager so would probably largely defer to the GP(s) and split the economics. If we can establish a decent short term track record maybe we can pursue a fund raise via LPs. 

Hey bros just checking back in here with an update. Milestone achieved today - cracked the big millie. Baring a meaningful market hiccup, I think my base case exit has been revised upward to $2.0mm.

For all those that are actually emotionally invested in this like hominem or those that think this is a troll job, I'll post a screenshot after I sell my warrants. Cheers.

9/3/2020, 11:53am (HYLN: ~$44 after dropping from ~$59 at 3:25pm the prior day)

Taking a beating today. Down from $1.15mm to $950k. 

OP, found a video of you. That September 1st/2nd/3rd trading day must have been wild. When it hit $44 a share at 11am, omg I shit my pants! Can you plz update us when you sold?

HYLN/SHLL

 

 

 
Dec 28, 2020 - 2:05pm

Like so many before; They, and you, mistook leverage for genius.

I don't know... Yeah. Almost definitely yes.

 
  • Associate 1 in IB - Ind
Dec 28, 2020 - 3:24pm
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