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Becoming financially independent as solo quant

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Re: Becoming financially independent as solo quant

#11

This seems similar to Renaissance Technologies, especially regarding the regression part. Funny how so many people are skeptical, as if they they want to be convinced that it's not possible. The fact Renaissance Technologies has been so successful for so long shows it can be done. Easy? no, but possible, yes.

RT is going to be a fantastic case study when their scheme unravels. The likelihood of the outcomes RT has enjoyed occurring without committing some kind of fraud or employing other illegal practices is basically (not exactly) zero. At this point it's more a question of whether their skill in hiding the shenanigans can continue to outpace discovery of them at a level of visibility that forces action by the authorities.

Re: Becoming financially independent as solo quant

#12

Relying on constant insane returns isn't financial independence. Considering how many people are working to extract money from equities it's most likely luck. Insane returns is one way to get to financial independence, because even if the edge exists, it's going to eventually disappear. You can boast about financial independence once you make enough to live the rest of your life from safe passive yield, after inflati…

Considering how many people are working to extract money from equities it's most likely luck. renaissance tech. has been doing it for 3 decades and with vasty more capital. maybe it is skill, too.

My guess is that they also have a lot of connections that make deals and information accessible to them the little guy doesn’t get.

Re: Becoming financially independent as solo quant

#13

This seems similar to Renaissance Technologies, especially regarding the regression part. Funny how so many people are skeptical, as if they they want to be convinced that it's not possible. The fact Renaissance Technologies has been so successful for so long shows it can be done. Easy? no, but possible, yes.

People once thought Bernie Madoffs fund were unbelievable.

Re: Becoming financially independent as solo quant

#15
I was able to do it consistently for over 3 years. I had a pretty successful strategy and could execute on that strategy using consumer grade trading APIs from Interactive Brokers. I had even extricated luck from most of the equation: ~9:1 profit/loss. It was an arbitrage strategy, so the luck variable became how often I had opportunities arise. I quit not because I couldn't make it work, but because I couldn't handle working alone for such a long time from a mental health perspective.

Here are my caveats:

1) low capacity strategies are the only ones that have a high enough profit/loss ratios but haven't been completely consumed by the hedge funds.

2) Because they are low capacity strategies, you can forget about compounding. Be happy with consistent cash flow.

3) Because they are low capacity, you can only feasibly scale across more products, not with bigger bets. This means that at some point, your connection bandwidth will become a bottleneck, even after you have graduated to professional data brokers. That then translates to a parallelization engineering problem. For me, it never made sense to deal with that complexity. It was better for me to have suboptimal earnings than to try to horizontally scale heterogeneously-active trading systems across servers in a data center.

Once you take into account the caveats, you can make a tech-industry level salary on your own with a lot of work. For some, the freedom may be worth it. For me it was, up until it wasn't.

Re: Becoming financially independent as solo quant

#16

Earlier quoted context omitted.

How much is reasonable for a family with 2 kids living in a medium expensive city in the US?

It's not so much about family size as it is burn rate. Check out something like FIRE calc: https://firecalc.com/ What you need to do is figure out the burn rate to sustain your family, figure out your safe withdrawal rate (e.g. 3.5%), then you can easily get amount of capital required. A Mormon friend of mine, with 5 kids, spends less on food for his family than we do (family of 4) --he/his wife are just much better…

Those historical returns are ridiculously optimistic. In fact stocks aren't great once you look globally. Imagine investing starting from 1900 Germany or Russia. In both cases you would be zeroed out. It's a form of survivorship bias to look at American stock markets only.

I think a 0% after-inflation return for a normal investor (ie. no specialized domain knowledge, no insider info) over the next several decades is already mildly optimistic.

Re: Becoming financially independent as solo quant

#17

This seems similar to Renaissance Technologies, especially regarding the regression part. Funny how so many people are skeptical, as if they they want to be convinced that it's not possible. The fact Renaissance Technologies has been so successful for so long shows it can be done. Easy? no, but possible, yes.

[deleted]

Re: Becoming financially independent as solo quant

#18
post #11

This seems similar to Renaissance Technologies, especially regarding the regression part. Funny how so many people are skeptical, as if they they want to be convinced that it's not possible. The fact Renaissance Technologies has been so successful for so long shows it can be done. Easy? no, but possible, yes.

RT is going to be a fantastic case study when their scheme unravels. The likelihood of the outcomes RT has enjoyed occurring without committing some kind of fraud or employing other illegal practices is basically (not exactly) zero. At this point it's more a question of whether their skill in hiding the shenanigans can continue to outpace discovery of them at a level of visibility that forces action by the authoritie…

Agreed.

I did originally buy into the explanation that they collected/digitized stock data that is no longer available.

But really it’s more likely to be some sort of fraud.

Re: Becoming financially independent as solo quant

#19

Earlier quoted context omitted.

How much is reasonable for a family with 2 kids living in a medium expensive city in the US?

It's not so much about family size as it is burn rate. Check out something like FIRE calc: https://firecalc.com/ What you need to do is figure out the burn rate to sustain your family, figure out your safe withdrawal rate (e.g. 3.5%), then you can easily get amount of capital required. A Mormon friend of mine, with 5 kids, spends less on food for his family than we do (family of 4) --he/his wife are just much better…

[deleted]

Re: Becoming financially independent as solo quant

#20
post #13

This seems similar to Renaissance Technologies, especially regarding the regression part. Funny how so many people are skeptical, as if they they want to be convinced that it's not possible. The fact Renaissance Technologies has been so successful for so long shows it can be done. Easy? no, but possible, yes.

People once thought Bernie Madoffs fund were unbelievable.

Rentech also mainly (only?) manage their own employees/partners money, so it'd be an interesting scam.
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