标题: Portfolio Manager VS Day Trader [打印本页] 作者: eagles_dare13 时间: 2013-8-11 16:56 标题: Portfolio Manager VS Day Trader
This is my first forum topic here and if this has been discussed in the past kindly refer me to the previous link(s).
After writing all 3 levels and spent countless hours on studying, like many other candidates/ charterholder, I question my motivation behind studying for CFA. Yes, it is probably too late as my effort has become sunk cost now and I can’t possibly get the time back, but since many people have already established the fact that 1) CFA doesn’t guarentee you a job, and 2) you need to be a super star (beyond and above being a CFA charterholder alone) to make top dollars in finance… I couldn’t help but wonder, if I am THAT good with stock-picking, do I have to work for a big investment firm to make the big bucks?
Here’s the thing, over the past couple years I’ve met many entrepreneurs and day-traders who, most of them, do not even have an undergraduate degree, and yet, they make at least as much (most often more) than an average portfolio manager.
Take one of my friends as an example, he started trading as soon as he’s old enough to open a trading account with couple thousand dollars from his part-time job. He barely made out of highschool and was self-educated, by 22 years old he was already making 6-figures and day trading full-time. If you were to take the investment banking route (finance degree –> CFA/ MBA), you would mostly likely still be a starving student participating in an online stock game at that age.
What I am trying to say is, if you are purely money driven and truly keen on beating the stock market, which A LOT OF people who study finance think they are and possess superior skills than others, would it make more sense to spend the time making money early than focus so much on going to top schools, studying things that may not benefit you at all, and go through hours of reading and mastering exam-writing strategies?
For those who are wondering… I am not bashing one profession over another, because quite frankly, I am neither. I don’t think I would be a successful banker rubbing shoulders with billionaires in private jets even if i have all my CFA, MBA and master in finance. And i don’t believe i have the smarts and discipline to make 700% return a year as a day trader. I am asking only because a lot of people ask me what’s my take on the CFA program and i have a mixed feeling because I am unsure if it’s really worth the time and energy. If i am already in the industry and my company sponsors me to take the CFA exam because it’s a requirement, fair enough, you’ve got to do what you’ve got to do. But as a university student thinking of a career path, if i’m just an average student it would certainly be easier to get employment by becoming an accountant and still make decent money.作者: lunarfollies 时间: 2013-8-11 16:57
You are right on the making money part i.e. if we possess the right skillsets and mindset early on etc, we should make as much money as we can as early as possible (succeeding at your own entreprenuerial start-up or as a full-time private trader). My 0.02 is that your friend is truly an outlier and it is the dream of most people (mine included) to trade full-time and be making big bucks (freedom from authority, no need to answer to anyone etc).
However, i guess most of us do not belong to the positive outlier category i.e. with great talent or connections, hence we tend to fall back on socially-defined paths to success/financial success (pursuing degrees, certifications such as CFA, post-graduate degrees such as MBA etc).
Though I just completed the L1 examinations, I didnt know what I have signed up for until I received the 6 textbooks and was totally blown away by the amount of material to cover. I also often question myself why did I get myself into this in the first place. Had I known the amount of work and the time and effort to write the exams, I wouldnt have started in the first place. (I’m just at L1, and still dont know if i can pass the exam and move on to the next level. Even if I manage to clear L1, it is still a long way to go). I remember a senior forumer mentioned in a post somewhere on the benefits of CFA as being less tangible - networking opportunities, gaining entry into an old boys/girls club, increased finance knowledge for personal use, sense of acheivement etc.
Somehow i guess if one thinks of the less tangible benefits, one could clearer see and ask oneself if it is worth the time and effort to complete the entire course. For myself, my country is paper-crazy (as with most Asian countries) and there are not as many charterholders (compared to other western countries where there are more). To motivate myself, I also tell myself to be circumspect when it comes to pure finance jobs (industry is shrinking, jobs are scarce etc) and that CFA is a good qualification to have on the resume and for personal finance knowledge, even if i do not get a pure finance job in the end (im working in a related field but not as a finance ‘insider’ i.e. in portfolio mgt or IBanking).
Guess if you are holding a full-time job, you could spend some time learning how to trade in your free time while waiting for L3 results (thats what i am learning now etc). And looking on the bright side, you have almost completed your CFA journey and can start to meet new people in your CFA society and some hiring opportunities might just come your way.作者: king_kong 时间: 2013-8-11 16:58
If you really are “THAT good” at stock picking, lock yourself up in a closet and day trade all day. in fact, do it with options if you are that good. Just know that most people fail, you only hear about the success stories, and the kid who became a milllionaire betting on penny stocks. Pure “day trading” moving thousands of shares daily, technical analysis etc. that’s dying, and being replaced by algo’s and programmers.
To successfully make a living off buying/selling stocks daily, you need leverage. You cannot survive on playing with a few thousand.
Also, you are incorrect on this : “”If you were to take the investment banking route (finance degree –> CFA/ MBA “”
the CFA and MBA target different areas of finance, it would be a mistke to generalize them together.作者: joehogue 时间: 2013-8-11 16:59
If you are still a student my advice would be to abandon financial services altogether and look into working for a company that creates something. The three years spent learning CFA is wasted as you are entering a pool of applicants with much better credentials that you, all seeking the same job. I’m older and too late to make a career change and the knowledge / CFA credential is helpful. But if I could be a college Senior again, I’d be in comp sciences learnign how to build something. Have you ever seen the CFA Job Line? Thousands of charterholders with a ton of experience searching for jobs. What makes you stand out? If you posess an innate skill for stock picking then CFA is irrelevant anyway and you should just monetize those picks. But day trading is garbage and 1% make money doing so over a long period of time. I’ve seen a lot of these “prop traders” and some can make money for a little while, but most wash out. Plus once you have “day trader” on your resume, you’ll never get employed at a proper firm.作者: kingstongal 时间: 2013-8-11 17:00
^ If I were back in college again I’d find a way to force myself to figure out engineering classes and maybe add business as a 2nd major. Alas here I am with CFA L2 and a resume covered with finance experience, so I guess I’ll make the best of it.作者: onelife1 时间: 2013-8-11 17:01
Become an actuary.作者: kkn006 时间: 2013-8-11 17:02
Nana - The answer to your question seems to revolve around mitigating downside risk.
1. Making a killing as a day trader, as was pointed out earlier, is incredibly rare; it’s even more rare over the long term. If you don’t end up wealthy enough to never ever have to interview again, you find yourself having to explain the three years you spent in your living room… Those who can successfully justify that experience usually blog or publish articles on the side to show they are serious and to gather a following they can later hope to monetize if their trading positions don’t pan out. If you work as a portfolio manager, you may not become a self-made millionaire, but you are gaining demonstrable skills and experience.
2. When you day-trade, you have no safety net other than your own savings. No monthly salary, no health benefits, you have to change the toner of your own printer, etc. When you have a regular job - again, less potential upside, but a lot more downside protection.
Your friend sounds like he is very successful and he makes it look easy, but it’s not… I know very good prop traders who thought they could do it on their own, only to realize it’s not that easy without the quant models and the research they used to rely on at their old firms (and they came back, or tried to, a couple of years later).
The bigger picture in your case doesn’t seem to be PM versus day-trading, it seems to be finance versus everything else… Reading your post it sounds like you’re not very excited about the curriculum. Lord knows a lot of us complain about it (and the work involved) on a regular basis, but I think most of us are still committed to this path and know why we’re doing it (to learn, to get better, to advance, to move, etc). If it doesn’t really appeal to you and if you’re just going through the motions, it’s still worth getting your designation since you’ve already gone that far, but you may want to get exposure to different sectors of finance to see if one resonates more with you, and possibly even start networking outside of finance. Life is too short to do something you don’t want to do!
Most of us don’t rub shoulders with billionaires or generate 700% of alpha, but most of us have less ambitious goals… If you are very good at what you do, make a very good living, and enjoy what you do - you can be pretty happy. It often takes some time and perseverance, but I hope you find the path that gets you there! Focus on your skills and passions, and rewards will follow - not the other way around.作者: yalo 时间: 2013-8-11 17:03
Greenman’s .02 on day trading - I’ll borrow a line from Warren Buffett. He was actually talking about hedge funds, but I think it applies equally to day trading.
(Paraphrased) “A list of big numbers multiplied by a zero at the end equals zero.”
I have met a few former day traders in my life, and I do not know a single one who didn’t learn this the hard way.作者: economicz 时间: 2013-8-11 17:05
I don’t think anyone just claim to be professional day trader the first day they open a trading account.
Obviously, all those day traders started working for someone else (at least part-time) during the learning curve until they are competent enough to make a living out of it.
And yes, most traders are not equipped enough to make a substantial living, but so is portfolio management/ investing banking! Think about all these highly educated degree holders and charter holders who want to “make it” in the industry, and how many of them end up making the big bucks?
My argument is, the chance of becoming a successful day trader is about the same as becoming an elite financier.作者: LorrinCFA 时间: 2013-8-11 17:06
you’d be hardpressed to find five day traders who make 60-100k/year from age 20 until they retire at age 60. this income is not very difficult to acheive for someone willing to put in the time at any investment firm. speaking as someone who started in a day trading firm, i was the only successful trader within a six month period. out of a class of 16 people, nobody was profitable except me, and i was only making $600/avg/week at my best.
the worst part about day trading is the fact that you can make $3,000 in a week and then lose $3,000 in 3 seconds. it is most demoralizing feeling in the world and not worth it at all.
day trading is dead. write algos and move on.作者: dvilayphet 时间: 2013-8-11 17:08
Thanks Matt,
That opens another discussion, if you’re only aiming to make 60-100K year (i’m assuming USD), there are many professions that make at least that with a less rigorous education process - why become a CFA?
Most CFAs probably aim to make a lot more than that i assume?作者: Andreas42 时间: 2013-8-11 17:11
i’d say the 60-100k range is pretty average and is attainable by almost anybody with the CFA charter over their lifetime. BUT, in addition to that 60-100k, you get to manage your portfolio at a professional level versus having to pay for it had you chosen another field. take 1-1.5% mgmt fee over 60 years and you’ve got plenty in additional unrealized income. plus, you have the opportunity of discovering investments that would otherwise go undiscovered and the opportunity to make crazy alpha that you would otherwise be unable to make.
personally, i enjoy finance content over sciences content. i’ve been doing TVofM calcs in my head since i was 12 just for the fun of it. i can be a blabbermouth so i need to be in either finance or law versus the sciences or tech, and finance involves much less study than law. i chose the CFA route because i enjoy it. CFAs may aim to make more than 100k, but very few do or will make much more than 100k. this is especially true in the “new normal”.
CFA makes you much more employable than some biology MS. going the CFA route is incredibly cost effective for the job opportunities it creates. at least i’m not an accountant.作者: justin88 时间: 2013-8-11 17:13
100% of asset managers make thier salary, 50% of (professional) day traders break even作者: tarunajwani 时间: 2013-8-11 17:14
The golden rule in trading is 4%. Those in that category absolutely kill it.作者: eoin 时间: 2013-8-11 17:17
You are probably still very young (i’m assuming) with limited experience. I think accountants in developed markets like singapore should offer accounting jobs at least at 60-70K range?作者: pennyless 时间: 2013-8-11 17:20
I’ve read somewhere that George Soros used to say to a roomful of portfolio manager hopefuls that in 5 yrs time more than two-thirds of them will get washed out of their careers (by the markets)作者: LBriscoe 时间: 2013-8-11 17:23
This thread highly reminds me of this short video.
One cartoon character uses the F word towards the end. Watch this alone, or use headphones作者: joehogue 时间: 2013-8-11 17:24
I think making a successful trading career takes much more effort than that. I think it takes somewhere 5-10 years before you find the method which suits your personality and statistical edge and lets not even consider the emotional pain with losing money, though there are exceptions. Took 8 years, 10000s of books, lost MONEY . I think its much much more psychological than anything to do with have an “edge”. It all depends what you love to do and how bad you want. I see a nice “Insurance plan” on my trading plan because I fail. Atleast I wont die hungry.
-“Win or lose, everybody gets what they want out of the market. Some people seem to like to lose, so they win by losing money.” Ed Seykota作者: PalacioHill 时间: 2013-8-11 17:27
I know several people who tried day trading and can say that only one can be called relatively successful. The advantage for this person is that his wife makes very good living working in health care, and that is his safety net. I don’t know if would have made it without such support system in place.
As for making money from trading - it’s up and down for him, it will not make him rich for sure.
