£1,000,000 in 1 year and 10 months - sounds like fun!!

[divinci]

I read somewhere that a clever person would put £10,000 into a 4% annual return bank account when they where 25 and then deposit a sum of £1,000 into that account every year. (That works out at around £85 a month)

When they retired at the age of 55 they would have £100,000 in that account to retire with.

So it got me thinking about the power of compounded interest and I thought id post some figures for you.

Enjoy :

1% return a day on your capital - your capital DOUBLES every 71 days.....
2% return a day on your capital - your capital DOUBLES every 37 days !
3% return a day on your capital - your capital DOUBLES every 26 days.....
4% return a day on your capital - your capital DOUBLES every 20 days !
5% return a day on your capital - your capital DOUBLES every 17 days.....
6% return a day on your capital - your capital DOUBLES every 13 days !

Of course this is all dependent on you reinvesting all of your returns - but even so :

1. If you started trading with £10,000 and averaged a 1% return every day
2. Reinvested that return and got another 1% the next day ect.
3. Worked 5 days of the week, 52 weeks of the year!!

Then you would have £1,000,000 in 1 year and 10 months..........................

So come on - lets all make a million!!!

 

[DavidS]

Doing it now mate!

 

[BBB]

This is very important, and shows why the best strategy is for consistent realistic results, rather than trying to hit home runs all the time.

Good post.

 

[sidinuk]

I read somewhere that a clever person would put £10,000 into a 4% annual return bank account when they where 25 and then deposit a sum of £1,000 into that account every year. (That works out at around £85 a month)

When they retired at the age of 55 they would have £100,000 in that account to retire with.

Brilliant, why doesn't everyone do that - you should sell that idea, you could call it, hmmm.. how about a pension?

 

[divinci]

being young an all i dont know much about pensions - but i sure do know that my dad will not get a 100 grand payout when he retires.

 

[ilia king]

divinci, why not just trade with that, bound to make more

 

[sidinuk]

Sorry mate, I couldn't resist a bit of sarcasm. You are right about compounding - it's incredible how quickly a little can become a lot. The problem is that most people don't give it time and will rather have a little money now rather than a lot of money at some time in the future.

 

[divinci]

divinci, why not just trade with that, bound to make more

That is the point im getting at with the final £1,000,000 figure. No bank or financial institution will consistently give you 1% return on your capital every day! But trading with an initial £10,000 and making 1% every day will get you very far indeed.

I was just thinking of all of these get rich quick schemes and as you said sidinuk most people are looking for a lot of money very quickly. What they dont realise is that if you consistently perfom and have patience the big money is in reach.

Now a question to anyone who trades on a daily basis - Is a 1% gain every day realistic? You could also look at it as a 6% gain every week ect.

 

[TheBramble]

1% per day may seem quite achievable, but you'll be doing better than average if you do hit this rate consistently.

 

[Skimbleshanks]

Bringing it all back down to reality, building societies give you 4% a year, approx. So aiming for 4% a month is an exceedingly good return by comparison. And compound that over a year, and you'll be made for life in trading.

Greed just gets you out of the game faster.

 

[BBB]

I wouldn't trade for anything less than 3% a week though. MAy as well give the money to some over rated fund manager for that.

Please dont take that as trumpet blowing - it's not ment to be. I've been at 'it' for a few years now so I feel its justified.

Happy Dayz!

 

[Rainmaker]

another way of looking at it - 4% pa is a common risk-free return in this country. anything more than that suggests that you are taking some risk. the greater the return, the greater the risk. not saying it isn't possible (because it certainly is!), but that your risk management has to be very good if you are shooting for much higher returns. you also need an edge!

 

[ilia king]

Well what money is left for tax, bills, food, fun?

 

[al-motor]

Divinci-

I did come up with that idea as well- BUT 1% per day as Bramble said is challenging......... consistency would be a problem, because u are talking about a 1% every single day- trading has its ups and downs........

Using this, u cant have failed/-ve days- which i think is not realistic in trading...............

But, i guess one could work on it.

Al

 

[volatileN]

I started trading an automated options system at the beginning of my first term in my second year at university (in 1999). My capital was my £3000 student loan. There was no discretion involved and, consequentially, it was very boring.

However, when I left 2 years later I started my masters with £55k deposit for my flat.

That is compounding for you.

The bit I hesitate to mention is that I put £10k into the same strategy early this year and am up just 9%. Dumb markets just don't always get it...!

 

[volatileN]

I started trading an automated options system at the beginning of my first term in my second year at university (in 1999). My capital was my £3000 student loan. There was no discretion involved and, consequentially, it was very boring.

However, when I left 2 years later I started my masters with £55k deposit for my flat.

That is compounding for you.

The bit I hesitate to mention is that I put £10k into the same strategy early this year and am up just 9%. Dumb markets just don't always get it...!

edted
CM

 

[divinci]

Divinci-

I did come up with that idea as well- BUT 1% per day as Bramble said is challenging......... consistency would be a problem, because u are talking about a 1% every single day- trading has its ups and downs........

Using this, u cant have failed/-ve days- which i think is not realistic in trading...............

But, i guess one could work on it.

Al

Thats right al-motor, the title of the thread isnt meant to be taken literally, I just found it very interesting to highlight the power of compounding.

The reality is that 1% gains every day is highy ambitious and rare. And even so - you could not pump every gain back into your investment capital.

But compounding, integrate it into your future investing plans.

 

[henry766]

One point about compounding shows that if your even a tiny bit consistently profitable over a shortish time frame , ( any intraday trader who is genuinly profitable) needs very little capitol to start .Take the compounding further and trade hourly and make just .25% underlying return per hour ( currently the spread with cmc and ig index( aprox most of time (.2%+mkt), *8 hrs *20 ( current stock margin on cmc ), will double your money in under 2 days with compounding .

 

[Splitlink]

Divinci-

I did come up with that idea as well- BUT 1% per day as Bramble said is challenging......... consistency would be a problem, because u are talking about a 1% every single day- trading has its ups and downs........

Using this, u cant have failed/-ve days- which i think is not realistic in trading...............

But, i guess one could work on it.

Al

I've tried that. Set it up on a table with Excel, compounding all the way to hundreds of thousands. Have you ever wondered why you do that when the garden has been rosy for a while? As soon as I set myself that target, things started to get difficult and, gradually, go wrong.

I take it as it comes, these days. Another item to ease stress. We do bring stress on ourselves by setting these targets, don't we?

 

[laptop1]

I read somewhere that a clever person would put £10,000 into a 4% annual return bank account when they where 25 and then deposit a sum of £1,000 into that account every year. (That works out at around £85 a month)

When they retired at the age of 55 they would have £100,000 in that account to retire with.

I think you are missing something nobody has mentioned inflation, if you factor inflation of 2.5% over the next 25 years, his £100,000 will not be worth £100,000 in today's money, it be worth around £37,000.

So 25 years have past you made £100,000 remember its only worth £37,000 in today money though, because one must factor in inflation of 2.5% it could be less if inflation goes higher over the next 25 years?...

OK, based on the above in 25 years time you money be worth £37,000. in today money...Lets say the bank will pay 5%, in the future..this leaves you with £1,850 a year for you retirement, or 35 quid a week, don't look so good now does it.