It's worth mentioning that there's a mailing list where EAs can ask for and give investment advice, which has some savvy investors on it: https://groups.google.com/forum/#!forum/ea-d-investment

It depends what you are investing in but, if it's equities and especially equity indices, one way that I know of (for those who have access) is spread betting. In the UK, you can effectively buy and sell futures with low spreads, and no taxes or commissions.

Today, for example, I can sell or buy the Dow at a price of 17320/17344 to settle in January 2016. On the site I use, I believe I need to have £50 of margin for each point I buy, so I can effectively buy a position of £173,000 by just having £500 deposited (though a very small movement against me will lead to having to put in more money or having my position closed).

If you can put in £1,750, you can have, say, a position of £173,000 which will stay open unless the index goes more than 1% below where it is now, or £86,500 open until it goes more than 2% below where it is now, etc.

The idea of buy-and-hold doesn't work well with the idea of leverage, since when you've got leverage you will always have the risk of being closed out, but you can increase the risk of your position by, say, 10 times and only be closed out with a 10% move against you.

I'm not a financial advisor and nothing I write should be considered advice of any sort.

If you are e.g. maximizing log wealth and prices are a gaussian brownian motion, then leveraged ETFs and leveraged positions are equivalent for small amounts of leverage, and the ETF is better for large amounts of leverage.

ETFs take their losses in small doses, a day at a time, while a leveraged position takes its losses with the probability of wipeout. If you scale down the leverage position when things get bad (or get margin-called), then you make the leveraged position closer to the leveraged ETF. Both losses are quadratic in expected volatility (for small leverage), and expected volatility is linear in the number of days for a GBM.

In this setting, the leveraged position is a bet on the anti-correlations of day-to-day movements, i.e. that volatility scales sublinearly with time. I think empirically this hasn't been true recently on the scale of months, but has been true on the scale of years---that said, there are more direct ways to bet on this question if you feel like betting.

Presumably your issue is not day trading vs. buy-and-hold, but that you aren't risk-averse (or at least you don't care so much about a wipe-out). If philanthropy as a whole is risk averse, then the same analysis applies for philanthrpists in aggregate, and this is coming down to your personal efforts to drag philanthropy towards an optimal aggregate allocation.

I don't think your treatment of risk for altruists is right. What matters is the correlation of your investment with available philanthropic capital: it's not necessarily a big deal if you lose 100% of your investment, but it is a big deal if your portfolio underperforms when the market underperforms, because all of the donors are losing money at the same time.

So you are basically making a judgment call about whether other donors to your cause are over- or under-exposed to the market. It's a fine call to try to make, but you should be aware that that's what it is.

In the world of rational donors, big charities, and CAPM, the result is that the risk-adjusted returns to the risky asset and the risk-free asset become equal for altruists, regardless of their portfolio composition. Then other idiosyncratic considerations kick in, and you end up with widely varying individual allocations. But the overall allocation is just the same as if there were one giant philanthropist.

Using 0-interest special offers from credit card companies is one crazy idea: https://news.ycombinator.com/item?id=3026230 You might do it just once, carefully building up your credit over years and then totally destroying it in the course of 24 hours. I'm not sure if this idea still works or if it could be made to scale.

Note that with using leverage, there's always margin calls, so calculating expected return becomes more complicated.

e.g. if you're at 5x leverage, a 20% loss in the market will wipe you out, and 20% losses happen pretty frequently in stocks.

I'm not sure what's the best quick and dirty way to adjust your expected return estimates to take account of this.

Maybe you could take your regular estimate (i.e. asset expected return * leverage ratio), then multiply it by the probability of wipe out in the relevant time period?

e.g. If you think the S&P has a 10% expected return, and you invest at 5x leverage for a year, the overall expected return is very roughly:

(1 - p ) 50% + p 0%

Where p is the probability of wipeout occurring in the period. In this case, p is the probability of a 20% loss occurring at some point in the next year.

In this case, it's only worth investing with the leverage if p < 0.8, and that's if you're fully risk neutral. I'm not sure what p is, but it could easily be ~80%, which would mean using 5x leverage has lower expected returns than unleveraged investing. Which could help to explain why so few people use that much leverage.

Paul might have a better way of thinking about this!

Rather than just buying out of the money call options, you could make a synthetic long position. http://www.theoptionsguide.com/synthetic-long-stock.aspx

With the margin requirements for a typical broker like Interactive Brokers, you can achieve about 10x leverage like that.

With margin borrowing, you'll only be able to get up to about 1.5x. Moreover, since you're not buying OTM calls (you're buying them at the money), you avoid the problem that OTM options seem to have low expected returns.

Futures are similar - you can get about 10x leverage. On a liquid index I'd expect you'd be able to buy one year futures, so you'd only need to trade your position once every 6-12 months.

If I remember correctly, CEA et al. decided against pursuing this strategy due to risk adversity. Due to the large downsides which may be unique to EA, it's not clear - to me at least - that our personal strategy should differ from this. I'd be interested in seeing some more thoughts on this.

Could you just use normal calls instead? Calls on the S&P500 a year out, at the current price, are on the order of $100, which seems like enough to get plenty leverage for most of us. If you think that the market is too afraid of the downside, then you can sell the corresponding put.