What kind of returns are possible?
- Thread starter Cutten
- Start date
So very true Cutten.
As my account size has increased, I have deliberately reduced the amount of risk I take.
Although it's quite obvious, most people forget that it's much harder to make $100,000 profit when starting with $25,000, than it is to make that some profit when starting with $2.5 million.
(Assuming inflation below 10%), If I had $1 billion, I probably wouldn't be too concerned about making 100% per year for the next 10 years, in order to reach $1 trillion. A return of 1% (government bonds and/or government insured bank accounts anyone?) would provide an income of $10 million.
As my account size has increased, I have deliberately reduced the amount of risk I take.
Although it's quite obvious, most people forget that it's much harder to make $100,000 profit when starting with $25,000, than it is to make that some profit when starting with $2.5 million.
(Assuming inflation below 10%), If I had $1 billion, I probably wouldn't be too concerned about making 100% per year for the next 10 years, in order to reach $1 trillion. A return of 1% (government bonds and/or government insured bank accounts anyone?) would provide an income of $10 million.
Technically, this is untrue. All of the funds still in the account are compounding as before. The original account value needs to be adjusted downward in the manner of a Present Value/Future Value calculation to reflect the periodic disposition of funds.
Quote from neutrino:
Cutten, would you reveal what's the point of this, or you'd rather wait for some more opinionsI really miss to see the point of this question, unless you are setting up your pension plan or something
Or is it just a theoretical question...
To find out what people's return expectations are.
What are our scalability assumptions?
I see
I really wonder if the people who voted "100%+" know even one investor/speculator who has achieved such spectacular risk adjusted returns. I don't think that there is such person. In fact I don't think that any person has ever achieved to increase his capital 1,000,000 times from speculation or investment for a period of 20 years, regardless of drawdown. I am sure that even in private equity there is no one with such record.
This just reminds me of an expected growth in equity I drew up long ago (when still unprofitable!). The expected annual return is dependent on capital under management. Here is something similar to what I drew up. At the end it should be asymptotic to expected natural growth in world asset prices /inflation (which I pinned at 3%)
Code:
Under Management Expected Return(%)
10,000 912
100,000 458
1,000,000 231
10,000,000 117
100,000,000 60
1,000,000,000 32
10,000,000,000 17
100,000,000,000 10
1,000,000,000,000 7
10,000,000,000,000 5