Another Investment Fish Seeks Advice

[revlis87]

Hi Guys,

A few reading this may know me personally - most don't. Like many of you, I am a 20 year old successful poker player. Now, I'd like to set myself up for the future as best as possible. Here's where I'm at right now:

180k in a series of Oakmark mutual funds that my "financial advisor" sold me on. I've got "The Oakmark Fund" "The Oakrmark Select Fund" and "The Oakmark Global Select Fund." My parents seem to think these things are great but I'm not sure they are the most educated in these matters. I do consider them intelligent, safe investors who have done well for themselves though.

I also have a really good connection who has gotten me into the "Citadel" Hedge Fund as of the first of this month. I have put $50,000 dollars into this one. From what I hear it's one of the best in the world and this is a tremendously profitable investment from an EV standpoint although it carries some risk. With the credit cruch, should I be looking to put more into this for my next investment?

Or, should I be looking elsewhere? The reality is I'd rather spend the time playing poker than looking into invidual stocks when I know I'm a fish in that game or at the very best SLIGHTLY more + EV than an index fund.

I take it I shouldn't be looking at a house until the market crashes a bit more? So my questions are numerous.

First - is this Oakmark thing a good investment, a great investment, or pretty mediocre? My sense is that it's mediocre-decent but I could be wrong.

Second - should I pour more money into Citadel, as it has the highest EV I'm sure, even though it's somewhat risky I suppose.

Third - should I further diversify into an index fund perhaps? Would I do better with Venguard index fund type thing than this oakmark? Should I switch my money over?

Let's see what you guys think and then I'll add a couple more questions and thoughts. I'm sorry in advance if this is so basic - I really know nothing about this stuff.

[gull]

1) Oakmarks funds are not great investments (in the sense that you can do better). This is because they have relatively high expense ratios, turnover, and cash drag.

2) I know nothing of Citadel, but I would not assume it's +EV.

3) Yes, I would suggest moving your money to Vanguard. Vanguard is a better fund company - it has cheaper funds (which means higher returns) and also more asset allocation choices.

[housenuts]

if you are an investment fish as you say you are, i'd imagine you'd be much more -EV than an index fund

[SlowHabit]

Move it to Vanguard.

Read and ask lots of questions. I suggest harassing DesertCat haha.

[SunOfBeach]

Hi,

I'd like to know more about your assets and expected future incomes to really advise you, but I sure as heck would stay with what you have now in Citadel, and would probably keep adding to it over time at about the same % of assets as you have now. I have no idea how you got in there with only 50k... but good for you.

PC

[spex x]

[ QUOTE ]
I take it I shouldn't be looking at a house until the market crashes a bit more?

[/ QUOTE ]

As a RE guy, I'd suggest that you DO NOT attempt to time the RE market. Despite what all the "experts" say, we simply don't know how long the down RE market will last. We certainly don't know what will happen in any specific market (i.e., yours).

My advice would be to buy a house as soon as you can afford it, and you are ready. I wouldn't suggest that you wait on the vague notion that the market might slump just a little bit lower.

One other thing: Down RE markets are, fundamentally, caused by lenders. Lenders started to get hit w/ defaults, so they tighten up lending criteria. This disqualifies a lot of potential buyers. Also, interest rates rise to reflect the lender's perceived risk. That means that the guy that could afford a $160k house at 6%, can only afford a $140k house at 7.5%. Plus he's gotta now come up with 10-20% down, which further diminishes the pool of buyers.

All that causes prices to go down. But, there is a problem when it comes to your situation. Namely, as a pro poker player you're not going to be too attractive to too many banks right now, and you'll probably end up paying a relatively high interest rate on the money. That is neither here nor there necessarily. But it means that the low prices in the down market are, in terms of monthly payments, made up for by virtue of the higher interest rates.

The point is that buying a house at a great price might not make much difference to you immediately. I will in 4 or 5 years when you refi, or when your house performs well in appreciation over time. But thats all speculation. If you're settled and not moving every year, and you can afford it, I'd suggest that you buy a house now. Don't try to time the market, just go get one that you like and will enjoy living in. Instead of paying that rent, you'll be putting that money into your own pocket.

[Taylor Caby]

I'm not an expert but I'd continue to build on that Citadel investment as much as possible. I don't think you're going to go "wrong" leaving your money in a few mutual funds, but you can certainly do better than this by using index funds and/or a money manager that knows that he's doing.

by the way, can i give you money to put into citadel [img]/images/graemlins/smile.gif[/img].

tc

[revlis87]

OK. Thanks guys.

So, I am going to go with the assumption that I am a profitable poker player. I have played very modest hours this year and I took 2 months off. I am also in school and didn't play a lot in January and February. I am still up something like $150 which I probably consider slightly below avg for what I can do. What I am trying to say is that, in future income, I think $300k a year is about what to expect if everything stays status quo.

In terms of assets - I don't really have a whole lot. I have basically all the computers, tvs, etc that I want. I've basically spent a lot of money on a couple trips to cool parts of the world. I don't drive - and I don't own a car. This doesn't really bother me. I don't own a home, and I rent at college for something like $550 a month so it isn't too bad.

Would you guys move everything out of Oakmark into Vanguard index fund? Should I just be looking at an SP500 index fund? Or is there something else that I should talkk with some people about and find out about that they offer?

How does this look:

I take the $170k I've got in Oakmark and move $100k of it into Vanguard Index Fund (Funds?)

I take the remaining $70k and put it into citadel giving me about 55% citadel and 45% Vanguard.

Any additional money I make I put in at a 65% citadel 25% vanguard and 10% cash. How does this sound?

Let's say I've got like 2-3 different funds going on Vanguard and then Citadel, does that qualify as "diversified" which I guess is the ultimate goal.

[APXG]

revlis,

citadel is like having the opportunity to stake antonius. Obviously, YOUR ev with them will depend on the fees they charge (what are they?), but the group of funds is hugely +EV both from their history, and approach to the markets -- unlike many other quant funds, these guys seem to understand the "long tail" viewpoint very well. Everything you allocate to the "ok to lose as long as +EV category" should be put in citadel if you have that opportunity. When it comes to EV, citadel is a dream for any "passive" investor.

[Ray Zee]

your 20 put your money where it earns well over your lifetime not where you hope to get a giant payoff. anytime someone manages your money they make the lions share over the long run. gambel on what you do best and let the averages in the market work for you.