20% per year with as little risk/work as possible?
- Thread starter michaelday
- Start date
you do have a point about taking risk trying to beat the treasury, I'm not advocating trying to be a yield hog. He was saying 20% returns and I think that would be too much risk. I was trying to talk him down. Oh and I love the youthfull attitude of P2. P2, when you are 5 years older ( he is a college kid ) and have survived this bear market, you will be a little less optimistic in your forecasts for returns. I know it seems easy sometimes but over time you will get more realistic.
dotslash i agree 100%.
Its only easy until you get fragged and you realize you had your nuts on the chopping block with all that size.
Then you keep trading big and die, or you cut back the risk and survive.
And once you've cut back the risk to a wiser level, badda-bing its hard again because your proportionately smaller wins aren't making you look like supertrader anymore.
speaking from painful experience.
Thanks for the replies.
I'm well aware of the fact that 20% is not easy to accomplish.
What I was trying to do is to find out what would you guys do if the goal was to make 20% with as little work/risk as possible. For example: daytrading = too much work, buying shares of one company for long term = too risky, managing mixed portfolio of stocks, bonds and funds would probably be acceptable risk/work ratio. On the other hand real estate is usually able to produce 10-15%, however in my opinion real estate at the moment is way over priced.
I'm well aware of the fact that 20% is not easy to accomplish.
What I was trying to do is to find out what would you guys do if the goal was to make 20% with as little work/risk as possible. For example: daytrading = too much work, buying shares of one company for long term = too risky, managing mixed portfolio of stocks, bonds and funds would probably be acceptable risk/work ratio. On the other hand real estate is usually able to produce 10-15%, however in my opinion real estate at the moment is way over priced.
learn it at www.moneychimp.com
It seems like one should be able to successfully combine some aspects of swing trading with some aspects of fundamental analysis and consistently beat the mkts. But I realize that's what many mutual fund mgrs try (very) unsuccessfully to do, but I still think it's gotta be possible
A good way to achieve gains in the realm of 20% with little risk would be as follows. This system would work better with foriegn markets other than the S&P currently because the S&P has a P/E about twice as high as say the ASX 200 in Australia. So capital growth is much more limited. You might want to consider stable foreign markets with weakness against the US currency so long term you make money on the currency trade when you repatriate your funds in 10 years time.
It works like this. Invest 90% of your money in an index tracking stock with no leverage. Recieve dividends in the realm of 5%. Over the longer term you may make another 7% in capital growth. This gives you about 12% PA.
Then you need to find yourself a good short term index futures swing system that issues both long and short trades. Use the other 10% of your capital to take equal and opposite short positions in the corresponding futures market to your long position in the index tracking fund. You are then short against the box. If you lose on one side you gain on the other.
You can even take a short futures position with a nominal value slightly more than than your total equity position.
In the longer term your upside on the equity poisition will be very similar to that of a buy and hold position. However, the short futures position should get you another 7% or 8% PA. About 100% of margin if you have a decent swing system.
Plus in very bad years where you would have lost 10% or 20% on you stock position, you will still finish ahead plus dividends. So your always up year on year. Which is important for compounding in the long term.
You use any profits on your futures trades to add to your equity position every year. Then when a bull market finally comes along you make good upside on the equity position with much fewer short trades.
Note: On the short trades you are making money off volitility. You will win some and lose some but with the right system should consistantly make good returns. Trades ranging from 2 days to 2 weeks should be the norm.
When you are not in a futures position, funds sit in an interest bearing account.
This type of system while a little labour intensive, will get you the type of return you want and dramatically reduce your exposure to crashes or prolonged bear markets. It is not dissimilar to how many hedge funds operate. I suggest a good mechanical trading system so your entry and exit rules constantly remain standardised.
In fact in todays environment, I think this is a much smarter way to hold a long stock position.
I would give you my system but then I would have to kill you.
Hope that helps you.
Runningbear
It works like this. Invest 90% of your money in an index tracking stock with no leverage. Recieve dividends in the realm of 5%. Over the longer term you may make another 7% in capital growth. This gives you about 12% PA.
Then you need to find yourself a good short term index futures swing system that issues both long and short trades. Use the other 10% of your capital to take equal and opposite short positions in the corresponding futures market to your long position in the index tracking fund. You are then short against the box. If you lose on one side you gain on the other.
You can even take a short futures position with a nominal value slightly more than than your total equity position.
In the longer term your upside on the equity poisition will be very similar to that of a buy and hold position. However, the short futures position should get you another 7% or 8% PA. About 100% of margin if you have a decent swing system.
Plus in very bad years where you would have lost 10% or 20% on you stock position, you will still finish ahead plus dividends. So your always up year on year. Which is important for compounding in the long term.
You use any profits on your futures trades to add to your equity position every year. Then when a bull market finally comes along you make good upside on the equity position with much fewer short trades.
Note: On the short trades you are making money off volitility. You will win some and lose some but with the right system should consistantly make good returns. Trades ranging from 2 days to 2 weeks should be the norm.
When you are not in a futures position, funds sit in an interest bearing account.
This type of system while a little labour intensive, will get you the type of return you want and dramatically reduce your exposure to crashes or prolonged bear markets. It is not dissimilar to how many hedge funds operate. I suggest a good mechanical trading system so your entry and exit rules constantly remain standardised.
In fact in todays environment, I think this is a much smarter way to hold a long stock position.
I would give you my system but then I would have to kill you.
Hope that helps you.
Runningbear