With this assumption, how much he is supposed to pay tax and comm for the next 50 years and for the next 400 years? Freely assume his initial seed of 10K or 100K.
23% Annual Returns
- Thread starter Eighteen Aces
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With this assumption, how much he is supposed to pay tax and comm for the next 50 years and for the next 400 years? Freely assume his initial seed of 10K or 100K.
I would never make a promise like that. If someone gave me their money to invest, I would tell them they might lose every penny.
If anyone ever promises you anything in investing... run fast and far.
I agree you that we NEVER promise 23% any more.
Probably your 23% is not certain and will not be backed by your own money.
Most traders had experience of 23% IN CERTAIN PERIOD before.
Getting 23% is very easy.
Getting 23% average every year over a 3 year period (especially, say, 2012-2015) is also very easy. -- Market conditions were ideal, you could just throw money in and I would go up.
Getting 23% average every year over a 20 year period is... difficult.. (unheard of?)
So how much you get as a number is not important. It's how much you get during a certain market period and how you get it.
Which also brings the point of risk adjusted return. I could put everything on black and win 3 times in a row and double up each time. Way better than 23%. But I could also get wiped out if it comes up red.
It takes one wipe out to kill the future of a company/individual. This is why 'good hedge funds won't try and take that amount of risk. Pay off can be great, but if it fails that would be a huge loss in capital -- enough to be the end of the hedge fund and the careers of those who run the hedge fund. Not a risk worth taking.
In fact, if you start to dig into the maths a bit more you'll find out that the portfolios being selected are based on risk adjusted return, and the amount of targeted return is being decreased in order to reduce the risk to an acceptable amount.
Now, back to the OP and perhaps an open question:
If Hedge Funds are barely keeping up with the market (+/- a few %), and they have smart guys with thick glasses doing this, what is the real incentive for a non-pro-day-trader to do what they do, rather than just throw it all into the S&P 500 ?
Getting 23% average every year over a 3 year period (especially, say, 2012-2015) is also very easy. -- Market conditions were ideal, you could just throw money in and I would go up.
Getting 23% average every year over a 20 year period is... difficult.. (unheard of?)
So how much you get as a number is not important. It's how much you get during a certain market period and how you get it.
Which also brings the point of risk adjusted return. I could put everything on black and win 3 times in a row and double up each time. Way better than 23%. But I could also get wiped out if it comes up red.
It takes one wipe out to kill the future of a company/individual. This is why 'good hedge funds won't try and take that amount of risk. Pay off can be great, but if it fails that would be a huge loss in capital -- enough to be the end of the hedge fund and the careers of those who run the hedge fund. Not a risk worth taking.
In fact, if you start to dig into the maths a bit more you'll find out that the portfolios being selected are based on risk adjusted return, and the amount of targeted return is being decreased in order to reduce the risk to an acceptable amount.
Now, back to the OP and perhaps an open question:
If Hedge Funds are barely keeping up with the market (+/- a few %), and they have smart guys with thick glasses doing this, what is the real incentive for a non-pro-day-trader to do what they do, rather than just throw it all into the S&P 500 ?
For example, let us assume you have seed of 100K with promising 23% for 30 years.
Then you are expected 100*1.23^30 = 49791.29K = 50M.
It is not possible for everyone to win in a zero-sum game.
Furthermore, if there is one person (keeping 20% return) for the last 400 years after Netherland's stock market, then everyone should be broke on earth.
Therefore, since no one had 20% return for the 400 years, there will be no such person from now too.
I agree, no person will have a 20% return for 400 years.
At least until we develop functional cryosleep.
I found a solution for that: I make 23% for 3 years in a row , and then start a new period of 3 years and do it again, and again...
So trading stays easy. And after 7 times 3 years I achieved "easily" what seems to be impossible.
Well, +23% per year is nothing.
Remember : +2400% in 5 years is a minimum.
http://www.elitetrader.com/et/index.php?threads/2400-in-5-years-whats-the-next-step.295481/
Any news from this guy ? I think he is up at least +5000%.
CM
Remember : +2400% in 5 years is a minimum.
http://www.elitetrader.com/et/index.php?threads/2400-in-5-years-whats-the-next-step.295481/
Any news from this guy ? I think he is up at least +5000%.
CM
Actually it is not hard to get 23% return during the 2013 to 2015 great bull market. If you "buy and hold" the following stocks:
S&P500 = ~15% (by reinvesting dividends)
Abbvie = 20%
Google = 28.2%
Facebook = 53.8%
Dexcom = 79.5%
And if you were one of the lucky guys who put money in AAPL when Steve Jobs took over around 2003, by 2015, you would have a 12 year compounded return of ~47% per year.
Also, you don't have to pay tax on your gain if you don't sell them.
I can find many other examples. Will they continue to have their outsize return in the future, probably not, but the same can be said of your 23% return.
I am not trying to discourage you, just to say anything is possible in the short term. To be a good trader, consistency over the long term is what every ET experts here (I am not an expert by the way) were saying you needed to achieve. So, keep trading and hopefully you will be like one of them, finding your own way to get consistently high returns year over year.
Best wishes.
S&P500 = ~15% (by reinvesting dividends)
Abbvie = 20%
Google = 28.2%
Facebook = 53.8%
Dexcom = 79.5%
And if you were one of the lucky guys who put money in AAPL when Steve Jobs took over around 2003, by 2015, you would have a 12 year compounded return of ~47% per year.
Also, you don't have to pay tax on your gain if you don't sell them.
I can find many other examples. Will they continue to have their outsize return in the future, probably not, but the same can be said of your 23% return.
I am not trying to discourage you, just to say anything is possible in the short term. To be a good trader, consistency over the long term is what every ET experts here (I am not an expert by the way) were saying you needed to achieve. So, keep trading and hopefully you will be like one of them, finding your own way to get consistently high returns year over year.
Best wishes.
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