Here you go, wrote this but there is one pure fire simple way to get trend ideas, you wait for something meaningful to happen and then slowly take the inversion (Buffett being greedy), interesting event in April 2020 ending in April 2022 for nearly 700% or 350%pa, that probably counts!
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How do normal day traders manage to profit 200-300% annually and hedge funds are able to return only 20-40%?
It’s simply scale but goes deeper, following on from other answers.
- It takes either experience in HFT, institutional or decades of trading to achieve those numbers which very few can do, even fewer can do it consistently, everyone else is faking it to make it.
- Hedge funds manage more money with investors having lower expectations reducing risk, this limits the returns profile to the normal 15–20%pa, they will split orders in to smaller chunks not to move the market against them.
- Actually a billionaire is created from someone who generates 150–200%pa return compounded for a decade or two, if it was not possible there really wouldn’t be any billionaires in a lifetime.
Yet this is not really what it’s about, the markets and life for that matter are dedicated to you losing your capital and net worth, then rebuilding it to rinse and repeat the cycle, if you lose $1,000 you can make it back in days, weeks, months so can push 200%pa, if you lose $1million it’s not so simple hence everyone accepts 15–20%pa.
Don’t get me wrong, you can happily turn $1mil in to $2mil in one year, there is an entity I know that will help you set up a Family Office and do just that, you probably wouldn’t follow any of the rules but that is another matter entirely, yet that’s not really the point, if you have $1k you can lose it one month and make it back the next, if you have $1mil it may still take you a decade but you will lose it.
There are 56million millionaires in the world, that number does not change much each year, what does change is who those people actually are, for the statistics that doesn’t matter but for you it does, money just changes hands and then every 40yrs or so there is an inflation shock which takes out most of everyone, if you didn’t spend years planning for it like the people I know, it will be a train wreck.
If you take $1,000 and compound 200%pa for 10yrs you end up with $1million, if you take $1million at 20%pa after 4yrs compounded you end up with $1mil profit, after 10yrs compounded you end up with $1mil profit per year on $5mil capital, but it doesn’t help you whether you make 200%pa or 20%pa if an event comes along and obliterates your capital, everyone assumes it won’t happen to them, very few escape it no matter if they are an employee or a millionaire
If you spend 80% of your effort making money and 20% protecting it you are guaranteed at some point to lose it, if you spend 20% of your effort making money and 80% protecting it you may or may not lose it based on many factors you will find out afterwards via experience.
Whether you have $1k at 200%pa or $1mil at 20%pa the above does not care, it transcends net worth and returns profiles but as with everything in life, no one cares until after it happens at which point it’s too late and they have to start again, being more tired, more annoyed, and in a new set of dynamics, the number of millionaires does not change much, but who are the millionaires does change.
70% of Rich Families Lose Their Wealth by the Second Generation
A little honesty might help preserve the family fortune.
https://money.com/rich-families-lose-wealth/
The wealthy are just better at hiding small facts like the above, it does not mean it doesn’t happen to them in equal measure, because it does, the only difference being I know wealth managers, hedge fund consultants, and family office advisors who make sure that does not happen!