Beating the market with Money management techniques.
I don't think enough emphasis is dedicated to Money Management techniques and it is easily overlooked what you can do with it to enhance your returns and minimize your risk.
I wanted to see what some of the expert think about different trading strategies and money management technique.
Here is mine (I donât trade like this but I might in the future)
Letâs say I have $10,000 (for easy math) to invest and my brokerage fees are $5 per trade (tradeking)
I would trade only two securities at the time. $5000 each.
My goal is to make at least 3% on each trade in a less then a month.
I figure that I can make 3% on each trade within a month or less with no huge risk providing that I find stocks only that are likely to produce 3% move within month and use technical indicators along with fundamentals to time the entry.
As soon as made 3% I would sell.
Commission fees would be $10 for each trade which equals to 0.2% on a $5000 trade.
I would still have 2.8% profit a month or 33.6% a year per security.
End of the year comes along and I have to pay 25% capital gain tax (holding security less then a year) and I would pay it and still have 29.4% net profit a year.
Profit per security:
Initial balance: $5,000
Capital Gain: $1,964 (33.6%)
Total taxes paid on capital gain: $491 (25%)
Total: $6,473
Profit: $1,473 (29.4%)
29.4% return. Or $95,223 within 10 year time. Not bad for one time investment.
Wouldnât that beat market in pretty much any given time with not lot of risk?
If you keep adding lets say $1000 a month you would end up with $451,309 over 10 year period after taxes and brokerage fees.
Note: You can set your goal to 4% or 5% a month but higher percentage, higher the risk.
We could also trade with only one security to lower commission cost but there will be more risk using only one security and commission fees are not bad anyway.
My example was just one time $10,000 investment.
I would love to hear some other money management or trading strategies ideas.
Thanks in advance
I don't think enough emphasis is dedicated to Money Management techniques and it is easily overlooked what you can do with it to enhance your returns and minimize your risk.
I wanted to see what some of the expert think about different trading strategies and money management technique.
Here is mine (I donât trade like this but I might in the future)
Letâs say I have $10,000 (for easy math) to invest and my brokerage fees are $5 per trade (tradeking)
I would trade only two securities at the time. $5000 each.
My goal is to make at least 3% on each trade in a less then a month.
I figure that I can make 3% on each trade within a month or less with no huge risk providing that I find stocks only that are likely to produce 3% move within month and use technical indicators along with fundamentals to time the entry.
As soon as made 3% I would sell.
Commission fees would be $10 for each trade which equals to 0.2% on a $5000 trade.
I would still have 2.8% profit a month or 33.6% a year per security.
End of the year comes along and I have to pay 25% capital gain tax (holding security less then a year) and I would pay it and still have 29.4% net profit a year.
Profit per security:
Initial balance: $5,000
Capital Gain: $1,964 (33.6%)
Total taxes paid on capital gain: $491 (25%)
Total: $6,473
Profit: $1,473 (29.4%)
29.4% return. Or $95,223 within 10 year time. Not bad for one time investment.
Wouldnât that beat market in pretty much any given time with not lot of risk?
If you keep adding lets say $1000 a month you would end up with $451,309 over 10 year period after taxes and brokerage fees.
Note: You can set your goal to 4% or 5% a month but higher percentage, higher the risk.
We could also trade with only one security to lower commission cost but there will be more risk using only one security and commission fees are not bad anyway.
My example was just one time $10,000 investment.
I would love to hear some other money management or trading strategies ideas.
Thanks in advance
