6 Minute Read

Tackle Today: Wiser Time 🕰

December 5, 2018

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≈ Another song, another mile. ≈

No time left now for shame, horizon behind me, no more pain.
Windswept stars blink and smile, another song, another mile.

Blame it on the scars of the wars we have fought. Blame it on the declining hormone levels. Whatever the case is, we become older and wiser at the same time. We forego expediency and start the search for meaning.

Money comes along in that journey. We begin caring about leaving something behind for our heirs. We let go the details of the leaves and start watching the forest.

When young we only care about aggressive ROIs. We’ve got to trade leveraged and aim high. Nothing to lose, right?

As we grow older, we think about the portfolio as a whole. Positions are just that, positions. Run the rules, analyze, trade, exit, profit, lose. The overall composition of the portfolio matters much more.

If you are investing in a weak or exotic currency you have to double your watch. You buy a stronger currency. What if the strong currency fails? You buy gold.

You invest a precious amount of time in designing the portfolio. You think about allocation between bonds, stocks, properties, strong currency, metals, and protective puts. You separate speculation from cash flow and hedge, all connected inside a monstrous spreadsheet. If the whole portfolio, once consolidated, is becoming wealthier and wealthier then you start welcoming your wisdom.

Sun is cold and rain is hard.
I know, been that way for all my time.

Chart of the Day

Portfolio Design: Current vs. Ideal Allocation

(a fictitious example)
Don’t wait until you are gray and wise. One of the first things you can do as a trader is designing your portfolio. Group the strategies you feel most confident in trading and define the ideal capital allocation for each one. The chart above—a fictitious example—compares the current capital allocation against the ideal one inside the four major groups of strategies for that particular trader. This is a simple chart you can easily develop from the spreadsheets made available by the Coaches at Tackle Trading.

Video of the Day

Options 201: Portfolio design

Coach Tim goes over the basics of portfolio design.

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