Wanted: 10% average return over next 18 years

[dbphoenix]

Keeping in mind that most beginning traders approach trading in much the same way as professional poker is approached by wannabes who have no idea whether or not a straight beats a full house, or even what a full house is.

Db

 

[Sonicscooter]

10% a year is definitely do-able. don't let other people tell you it's not, just because most likely they haven't achieved it.

Some one tonight will win the National Lottery, but hey, don't let odds or common sense stand in your way.

 

[lawrence-lugar]

Some one tonight will win the National Lottery, but hey, don't let odds or common sense stand in your way.

10% a year is Not considered a far-fetched dream.
that's relatively very doable.

you can more or less make that selling options for the premium.

...if you're just gambling on stocks...hoping and praying...they all go up...then yes, you're gambling...and i can see why most people would consider 10% a year a dream.

(these message boards are filled with amateur and/or jaded cynical traders.)

 

[Sonicscooter]

10% a year is Not considered a far-fetched dream.
that's relatively very doable.

you can more or less make that selling options for the premium.

...if you're just gambling on stocks...hoping and praying...they all go up...then yes, you're gambling...and i can see why most people would consider 10% a year a dream.

(these message boards are filled with amateur and/or jaded cynical traders.)

Have you bothered to read this thread, the Guy hasn't any experience, none, and you a talking like he is a trader, your comments are futile.................

 

[tar]

You will spend the 32k learning to trade ...

 

[BSD]

However, if one is trading OPM, the worst that can happen is that he gets fired.

In the final analysis, whatever anyone else earns or claims to earn is of no relevance to any given individual's prospects. His results will depend on the time and effort he puts in to studying, researching, practicing.

Db

I was thinking more of the guys who started and own their funds like eg Paul Tudor Jones who has 90% of his own money in his fund, because he says he wouldn't know where else to invest.



Re what other people make.

I do think it is important to benchmark and assess best practises.

Starting out, I had absolutely no clue what was or what wasn't achievable in trading, and for me one of the biggest steps forward was actually seeing others regularly make 20% a month.

Outside of trading - and crack cocaine dealing etc. - NO ONE makes returns even remotely near that, so of course it's imperative to know what CAN be done, otherwise where on earth would ya start.

Make a goal of making 20 % a year on your savings of 20 k ?

Not really gonna pay the bills, right ?

Anyway, seeing some guys make 20% a month and more is what Psychologically gave me the all important confidence to say, hey, if those asses can do that, so can I !

But they were nice asses, truth be told.

 

[dbphoenix]

From “The Mind Game”:

Once one has determined his goals, the next most logical step would seem to be a choice of strategy that will enable him to reach those goals, preferably as soon as possible. But just as going to the store and getting the roller and the paint is not all you need to do in order to paint the house (first you have to repair it, sand it, caulk it, prime it . . .), choosing one's strategy is not necessarily his next task. How is he going to go about choosing that strategy? Will he choose the one which claims to provide the greatest return in the least amount of time? What if it ties his stomach in knots? What if it seems not to deliver as quickly as it promised? Perhaps something slower and steadier would be more appropriate. But what if its timeline is intolerable? What if the trader just can't summon the patience to wait for the promised benefits of the safer and steadier course?

Many new traders will take the adopt-a-guru approach. They'll have heard about or read about Warren Buffet or Peter Lynch. Or they'll have heard about daytrading and its supposed rewards. They'll read one or all of Buffet's or Lynch's books. Or they'll read one of the "interviews with traders"-type books churned out by Schwager or Abell or Koppel or Tharp, among others, believing that if they can emulate these gurus and adopt their behaviors and behavior patterns, then they will be well on their way to reaching those goals they so carefully articulated.

The most obvious and inescapable problem with this approach is that one puts himself in the position of becoming someone else. Perhaps this is done on purpose because he believes that he does not have what it takes to be a success in the markets, but that he can achieve that elusive success if he can think and behave like a demonstrated achiever. And this approach can in fact work out quite well for some if they coincidentally just happen to be on the same wavelength as the guru in question, just as there is often a ring of recognition between two soon-to-be lovers when they find they've met their soulmates.

But the fan club approach to trading will eventually begin to chafe many newbies because they've made the error of trying to adapt themselves to what may essentially be an incompatible strategy, rather than try to determine exactly what kind of trader they are, then find a strategy that's appropriate to that type of trader.

By "type of trader" I don't mean short-term or long-term or aggressive. How one characterizes himself as an trader is a direct result of and is inextricably connected to the kind of person he is. A person who can't tolerate risk in real-life sure won't be able to tolerate it well as a way of approaching the markets. A person who is rightfully proud of his intelligence and skill and the quality of his judgement isn't likely to find happiness with a mechanical strategy that prevents him from using any of that. A person who is fearful, lacks self-confidence, is subject to self-doubt, fits of anger, feelings of envy or even greed will find the going much rougher than the individual who's gone through some serious self-examination and is ready to meet the market on its terms. Are you thoughtful or impulsive? Conservative or wild? Are you patient or do you have a short fuse? When confronted with an obstacle, do you immediately become frustrated or do you begin to evaluate various ways of getting around, over, or through the obstacle? Are you methodical or do you act according to your "gut feeling"? Are you focused? Easily distracted? Do you walk fast or slow? Do you put your socks in the laundry hamper or do you leave them where they lie?

These are only a few of the questions that you'll eventually wind up asking yourself, but they must be addressed sooner or later as everything else flows from the answers. The less one knows about himself, the more disconnected he will become from himself and his surroundings and the poorer his results will be. You may have yet to deal with this step, perhaps because it's the most difficult or perhaps because it never even occurred to you that it might be necessary. But it's both difficult and necessary and you won't succeed as a trader until you come to terms with it. Therapy is an option, of course, and a surprising number of people do go through it in order to become better traders. But not everyone is going to go that far just to obtain an edge.

(And so on . . .)

 

[Ultramagnetic]

To clarify, I am not interested in "trading", I am not going to gamble my pension savings away.

So 10% is not possible, I see now.

Thanks for all the replies. Especially you Tim, that was useful.

 

[Ultramagnetic]

To clarify, I am not interested in "trading", I am not going to gamble my pension savings away.

So 10% is not possible, I see now.

Thanks for all the replies. Especially you Tim, that was useful.

Oh and Alexaherself. In light of this thread perhaps gambling on the government maintaining a favourable attitude towards absentee landlords is no less crazy than putting my money in the stock market.

 

[dbphoenix]

To clarify, I am not interested in "trading", I am not going to gamble my pension savings away.

So 10% is not possible, I see now.

That depends on whether or not you're willing to do whatever is necessary to make it happen. If you aren't, then it isn't.

Something for you to think about:

The table below shows the results of a study done a number of years ago by CDA (now Thomson Financial)/ Weisenburger. The perceptive reader will notice, of course, that the headers refer to "perfect" timing. This is attainable only through hindsight as one must be able to pick the exact top and the exact bottom for the year under consideration. But the differences between buy-and-hold and perfect timing are so dramatic that all but the most skeptical must admit that even if one were to come within only ten or fifteen percent of the top or bottom that his results would be far superior to those of a buy-and-hold strategy.

Db

 

[Ultramagnetic]

That depends on whether or not you're willing to do whatever is necessary to make it happen. If you aren't, then it isn't.

Something for you to think about:

The table below shows the results of a study done a number of years ago by CDA (now Thomson Financial)/ Weisenburger. The perceptive reader will notice, of course, that the headers refer to "perfect" timing. This is attainable only through hindsight as one must be able to pick the exact top and the exact bottom for the year under consideration. But the differences between buy-and-hold and perfect timing are so dramatic that all but the most skeptical must admit that even if one were to come within only ten or fifteen percent of the top or bottom that his results would be far superior to those of a buy-and-hold strategy.

Db

Now this is the kind of what I had in mind when I came to this thread, is there a way that a person of average intelligence with some time and dedication is able to do better than buy and hold without risking the shirt on their back.

But of course if it there is some kind of repeatable method or formula to achieve this, why do most professional fund managers fail to beat the market?

 

[dbphoenix]

Now this is the kind of what I had in mind when I came to this thread, is there a way that a person of average intelligence with some time and dedication is able to do better than buy and hold without risking the shirt on their back.

But of course if it there is some kind of repeatable method or formula to achieve this, why do most professional fund managers fail to beat the market?

It's a long story. The best, of course, do. The rest, well . . . Many "professionals" have short memories. In a few years, most will have never heard of Martin Zweig.

But to answer your first question, yes. But it takes work, and few are willing to put in the effort.

I wrote all this back in '04 but nothing has changed. The following precedes what I posted just above:

Only rank amateurs try to time the market. It's impossible. No one can do it other than through pure luck. Market-timers aren't investors, they're gamblers. If you want to succeed at investing, focus on the "long term" and put your trust in a safe and secure mutual fund with a "long-term" record of superior performance.

Or at least that's what the mutual funds say. And they've been saying it for so many years (they hit their stride in '94) that it has become an article of faith. Forget that only a handful of funds outperform the market averages each year. Forget that funds have been able to ignore 1987 in their 10-year track records for some time now (and in a year, they can drop '00 from their 5-year). Forget that -- their protestations to the contrary -- they are often proclaiming in ponderous tones that the market is "overbought" or "oversold", that they wouldn't buy ACME "here" because it's "overpriced", but that they'd buy it "there" because that would be a "real buying opportunity". When they are not being "cautious" or "standing on the sidelines", they are beating drums, banging on tables, backing up trucks. But only rank amateurs try to time the market.

The fact is that market timing is not all that difficult. In fact, if you can plot a point on a graph and tie your own shoes, you can time the market. Even those whose VCR clocks are still blinking can time the market. The Long Term Buy and Hold contingent (the LTBH) will assure you that it can't be done because (a) they've been listening to the funds for all these years, (b) they don't know how to do it, and (c) they don't really care enough about it to want to learn how to do it even if they could be convinced that it could be done. All things considered, they'd rather spend the time with their spouses or children or houseboys. Or read a book. Or hitchhike through Europe. (There is also probably an LTBH subset that believes that if they don't know how to do something, it's not worth doing. Or if they haven't been somewhere, it's not worth going. Or if they haven't seen something, it's not worth seeing. But they generally belong to the NRA and have their money buried in the backyard, so their skepticism won't be addressed here.)

This is not to say that just anyone can pick the absolute top and the absolute bottom. That truly is virtually impossible except on an occasional basis, but even then it's more likely to be the result of chance and not of any particular genius or skill. But one can get pretty damn close to the bottom and/or the top, enough to make the effort more than worthwhile. And even a confirmed LTBHer who believes beyond all reason the LTBH mantra must admit in those rare flashes of lucidity that he wishes he had sold ACME at 180 after buying it at 150 rather than hold it all the way down to 14.

(insert table here)​

 

[dbphoenix]

And this follows the table:

Timing the market (or the sector) for the sake of timing the market is largely a pointless exercise if one is in the market for no other reason than to be "in the market". But only the pathological are in the market to lose money. The rest are in the market to make money, that is they want their stocks to go up, not down. They want to participate in the upside, but truth be told would prefer not to participate in the downside. The LTBH contingent will again declaim that the one is not possible without the other, that one pays his money and takes his chances, but thinking about market timing as nothing more than another form of risk management can help to chip away at this steely opposition, "risk management" being defined as maximizing one's participation in the upside and minimizing his participation in the downside. The thoroughly-converted LTBHer who would rather be dragged screaming than to entertain the notion of market-timing (or risk management) may now drag out the old LTBH chestnut about how being out of the market during its 40 Best Days or whatever over whatever period of time would slash one's results to ribbons. However, missing the 40 Best and Worst days during the period from 1980 to 1989 -- during which time the S&P 500 returned an average of 17.6% -- would have increased one's return to 21.3%. According to Sosnowy:

In order to be a successful risk management investment strategy, market timing does not have to be perfect. Despite belief to the contrary, market timing does not target getting in and out of the market at the absolute bottoms or tops. It does, however, strive to get an investor's funds out of the market before a major bear market devastates the portfolio. Market timing's first and foremost priority is the preservation of capital.​

The purpose of this, however, is not to provide a catalogue of the statistical birdies that market timers and LTBHers lob at each other whenever this subject is introduced; it is to examine the conditions under which market timing is possible.

There are any number of market-watchers -- technicians and fundamentalists alike -- who employ all sorts of "indicators" to tell them what the market is going to do or is likely to do, or which will at least give them a sense of the "health" of the market. They'll look at what percentage of stocks are above or below some moving average or other, how the cosine of the volume relates to the cube root of the closing price (undiluted), where "investor sentiment" is running (which tells one only what investors say they're thinking, not what they are actually doing in terms of buying and selling), who's buying puts (or calls) and where and when and how many, how the slow stochastic confirms (or not) the fast RSI or the MFI or the OBV or the QED.

None of this, however, is really necessary. And since none of these indicators will tell you what you want to know, they are not even desirable. They can, in fact, persuade you to do exactly the opposite of what you ought to be doing.
Assuming that you understand the Law of Demand and Supply file and the nature of distribution and accumulation, there are only a few other items which you need to know in order to arrive at a few reliable conclusions regarding the likelihood of a top or bottom in the market, and you don't need an expensive charting program in order to track them.

And it goes on, but this should be enough.

Db

 

[tomorton]

Whether in TA or FA, predictive strategies must fail, responsive strategies will win.

 

[MikeMurf]

Advantage of paying off the mortgage

1. I would like to add my voice to those who advised the paying off of the mortgage. And a point I would like to make which I don't think anyone has mentioned is when you do this you are heavily de-risking yourself. The sense of relief is immense. But if you go down the investment route you are committing yourself to 18 years of worry and heartache - it is NOT an easy route (as can be seen from the comments).

2. You have money in a SIPP giving perhaps 1-2% & you have a mortgage which is obviously costing you more. This does not make sense. Pay of the mortgage with the SIPP

3. You seem like a nice guy but I feel you are not temperamentally suited to market investment - it's a den of vipers out there & I fear for you. Do you have the intestitudinal fortitude to take a 20% hit on your retirement money? I don't get the feeling that you have. Given all I have seen on this thread I would advise you to stay out of trading.

Hope this helps.

 

[MikeMurf]

I must say I'm surprised by all this negativity
there is a certain thread which makes trading as easy as playing pitch and putt with returns way in excess of 4% per month let alone per year!!!
think of the compounding, the riches you could make
I say stick all your money in this method as its clearly being endorsed by its continuity on this site and let us all know when you paid off your mortgage..in fact remortgage..steal if you can...whatever it takes to get as much money together and then play trading off a 1min timeframe. you'll be stinking rich.
an expert giving master classes can't be wrong

Which tread is that?

 

[Ultramagnetic]

You seem like a nice guy

You're too kind.

Do you have the intestitudinal fortitude to take a 20% hit on your retirement money

Of course not.

Pay of the mortgage with the SIPP

I don't think that's possible but I you'll be relieved to hear you lot have bullied me into prioritising paying off my mortgage.

Hope this helps

It does, thanks.

And may I add that I feel most houred that after 11 years of lurking on this grand forum your chose my thread to make your first post

 

[Sonicscooter]

"I don't think that's possible but I you'll be relieved to hear you lot have bullied me into prioritising paying off my mortgage. "


Thank goodness for that, you will not regret it, it will make you feel somewhat empowered.

Good luck.

Regards Shane.........

 

[timsk]

. . . I don't think that's possible but you'll be relieved to hear you lot have bullied me into prioritising paying off my mortgage. . .

Hi Ultramagnetic,
I hope your comment about being bullied was said tongue in cheek, and I second shane and MikeMurf's comments regarding the upside at a personal level when you pay it off. Obviously, the speed with which you achieve it will depend on the size of your mortgage and the amount you're able to put away each month. As the size of the debt goes down, along with the interest payable on it, the amount you'll save rockets up. After a while, you'll really notice the effect of compounding - and I promise you it'll make you feel all warm and fuzzy inside. Having made the decision to do it, have a play with the numbers and calculate just how quickly you can get shot of it. Needless to say, reducing the cost of big ticket items will make a big difference. Swap the 7 series beemer for a humble Ford, go to Centre Parcs for family holidays rather than the Seychelles etc., etc. Back in the nineties, my wife and I really pushed it and it took us 5 years to get shot of a 25 year mortgage. It was so, so worth it and the lifestyle choices we've been able to make since wouldn't have been available to us if we'd just stuck to the original 25 year repayment plan.

Good luck with it - you won't regret it.

Tim.

 

[Hoggums]

Yes.



I'd be researching and learning all I could about buy-to-let property.

It strikes me that your current £32k is more than enough for a 25% deposit (and that's what you'd probably need) on a 4-bedroomed terraced house in a Northern university city (Leeds? Newcastle? Two in Hull?!) where lettings are comparatively easy and reliable, from the landlord's perspective. A lot depends on how passively/actively you'd want to be involved with it, yourself. That's just one initial suggestion; others may be better.

This won't work because you won't have the benefit of compounding.