Realistic Rate of Return?

[craft]

yes, 100% per annum

That's not even close to realistic.

10K starting capital and no leverage and you would still be the richest person in the world in 20 Years.

Trying to force a return on the market is **** about face anyway. You can't control the market - you can only position your self to benefit when the market is generous and survive when it's not.

You can work on your process and skills but you can't dictate how much or when you will be compensated for your efforts. A compoundable return on unleveraged capital over an investing career of 20%p.a would be legendary ( ie Buffets long term return is only 20%) - realistic - shoot a little lower.

You might have good years and knock the socks of 20% in any given year - but long term the market eats dreamers that don't have the humility to understand the nature of their relationship with the market and the skills and aptitude to deal with the lean periods.

 

[craft]

Its should be a business.
How many businesses return 100% or more on investment
in a year year after year with a starting capital or 100-200K?

The even bigger question is how many of these businesses (if any exist) can take the earnings and re-invest it and still make the same returns on the expanded capital base.

If you’re not thinking about the scalability (ie compounding your earnings) then you’re aiming at an endless journey on the treadmill even with a 100% return. Earn it – Spend it all – you might as well just have a job.

 

[5oclock]

The even bigger question is how many of these businesses (if any exist) can take the earnings and re-invest it and still make the same returns on the expanded capital base.

If you’re not thinking about the scalability (ie compounding your earnings) then you’re aiming at an endless journey on the treadmill even with a 100% return. Earn it – Spend it all – you might as well just have a job.

Very good point!!!!! +1

 

[Gringotts Bank]

This is interesting about Guppy's performance figures. From Amazon reviews:

Although Guppy uses a number of ideas in his trading, his core trend trading techniques involve the use of trend lines, the Count Back Line, Guppy Multiple Moving Averages and a basic 10ema/30ema crossover system. I've tested all these systems thoroughly using TradeSim, in various combinations on thousands of stocks over 20 years of data. They're hopeless. Even in a roaring bull market they perform only adequately. You'd need a whole lot of discretion to get them to perform as well as he claims they work in his newsletter.

I was a subscriber to his newsletter for two years. Some cheating (or some egregious errors at the very least) boosted the performance figures in his newsletter. Back then I was a novice trader, and I found his exit techniques very confusing. I counted at least 8 different exit methods - the worst one being just a gut feeling that he'd made enough profit. It took me a long time to realize that this was all symptomatic of his sloppy approach, not just my inability to understand him. His understanding and use of statistics is especially poor.

I think this once again reinforces the idea that one needs much more than technique, method, position sizing, risk management and trade management. Intuitively knowing when to sell - it looks like Guppy can do this. My explanation for this ability is that he has the perfect mindset for trading, but you may have your own. You don't get to be that successful using techniques that simply do not backtest profitably. But can he teach others? I'd say no, absolutely not. Can you profit by using his newsletter? Probably. I can't tell how realistic his 90% average return is. Has anyone researched this?

 

[5oclock]

GB its a big call saying none of Guppys techneques work even in a bull market!!!!!! Ever heard of Darvas?? ONE of Guppys methods is Darvas and we all know that that worked---and before you think this is a personal go at you it isnt, just wondering at a big call and if you tested all his methods---also i have in no way any barrow to push for Guppy.

 

[craft]

Has anyone researched this?

How can you? the supporting data is not available.

The burden of proof lays on the claim. Until the claim is proved beyond a reasonable doubt - Its bull**** to a prudent person I would think.

10K put in at the start of the claimed performance record would now be worth 304 Million. Where are all the customers yachts'?

 

[Gringotts Bank]

GB its a big call saying none of Guppys techneques work even in a bull market!!!!!! Ever heard of Darvas?? ONE of Guppys methods is Darvas and we all know that that worked---and before you think this is a personal go at you it isnt, just wondering at a big call and if you tested all his methods---also i have in no way any barrow to push for Guppy.

The reviewer said they perform only adequately in a strong bull market, (meaning you'd be getting a positive return but probably with some big drawdowns on an ugly equity curve). This guy's review indicates that Guppy does not trade the way he indicates in his books, because if he did, he wouldn't achieve 90% ave. returns over so many years. It indicates that Guppy exits a trade whenever he damn well feels like it's the right time. Guppy himself obviously has an intuitive ability to read markets and be very profitable. This is the same with all top traders.

I tested his multiple moving average many years ago, (but used a Jurik low lag MA to try to improve things). Got nuthin. I tried it with all manner of stops - time, profit/loss, trailing. If one of his strategies is useless, probably all of them are. But my point, again, Guppy himself knows when to sell and it's different every time according to this reviewer. HE makes money, and perhaps his subscribers do, but you can bet those who try to implement strategies outlined in his books do not.

 

[Trembling Hand]

How can you? the supporting data is not available.

The burden of proof lays on the claim. Until the claim is proved beyond a reasonable doubt - Its bull**** to a prudent person I would think.

10K put in at the start of the claimed performance record would now be worth 304 Million. Where are all the customers yachts'?

I'm not disputing you post but no one compounds like that. Especially in the ASX small caps. I don't think even the worst of nuttiest claim that an approach is scalable out to infinity. Guppy does say that these results are based on an account reset at 100g each year.

 

[tech/a]

Actually agree with a lot of GB's comments.
From a T/A perspective its very average.

 

[beachlife]

This getting silly now. I never said anything about compounding to $300m and buying super yahcts.

Guppy has a newsletter with a sample portfolio. It has a $100k capital base. He doesnt compound. Each year for many years he has generated around $100k in profits in this sample portfolio, mathematically a 100% pa return (even in 2008). A 'job' I could live with and happily pay tax on. His results are documented in real time in his newsletters. Yes I too find his books difficult to read, and his exact system is hard to figure out, but I am happy to accept that his newsletter are genuine.

This opened my mind to the possibility that it is possible to consistantly generate a nice wage from a base well below $1m, and I have set out to give it a go, but havent quit my day job just yet. If you dont know how to do it dont say it cant be done, open your mind to the possibility that you just dont know how to do it.

I'm sure GB will agree with this, they say if you want to be successfull surround yourself with like minded POSITIVE people. No one like that here, just closed minds, suspicion and endless negativity.

Adios.

 

[tech/a]

This getting silly now. I never said anything about compounding to $300m and buying super yahcts.

Guppy has a newsletter with a sample portfolio. It has a $100k capital base. He doesnt compound. Each year for many years he has generated around $100k in profits in this sample portfolio, mathematically a 100% pa return (even in 2008). A 'job' I could live with and happily pay tax on. His results are documented in real time in his newsletters. Yes I too find his books difficult to read, and his exact system is hard to figure out, but I am happy to accept that his newsletter are genuine.

This opened my mind to the possibility that it is possible to consistantly generate a nice wage from a base well below $1m, and I have set out to give it a go, but havent quit my day job just yet. If you dont know how to do it dont say it cant be done, open your mind to the possibility that you just dont know how to do it.

I'm sure GB will agree with this, they say if you want to be successfull surround yourself with like minded POSITIVE people. No one like that here, just closed minds, suspicion and endless negativity.

Adios.

So one poster here has told you he has returned -10% to +800%
I've a method which has been published which turned $30K into $360K in 5 years but was leveraged 2:1

You've also been told home truths.
What more do you want?

Perhaps you should contact Guppy?

 

[craft]

I'm not disputing you post but no one compounds like that. Especially in the ASX small caps. I don't think even the worst of nuttiest claim that an approach is scalable out to infinity. Guppy does say that these results are based on an account reset at 100g each year.

I didn’t know Guppy stated he reset the base each year – didn’t see that on the page linked too with the performance figures.

Resting the account each year drops the Compound Annual Return to about 18%.

To me compound annual return (on all available funds) is the only sensible measure. Seems I don’t naturally make the assumption that others like to state their results differently. (Guess my way of figuring wouldn't sell many newsletters)

 

[McLovin]

If you're not interested in compounding, then why not do something like opening a lawn mowing service. You'll probably earn more on your capital.

 

[VSntchr]

If you're not interested in compounding, then why not do something like opening a lawn mowing service. You'll probably earn more on your capital.

Jim would probably have something to say about the ability to compound returns in the lawn mowing area!

 

[Trembling Hand]

(Guess my way of figuring wouldn't sell many newsletters)

yep that I do agree on.

If you're not interested in compounding, then why not do something like opening a lawn mowing service. You'll probably earn more on your capital.

My point about compounding in part goes like this,

year 1 = $100,000 * 100% = $200,000 less 30% tax (-$30,000), less cost (data, accountant etc, $2000), Less living expenses ($30,000)

Year 2 = $138,000 * 100% = $276,000 less 50% tax (-$69,000) less cost (data, accountant etc, $2000), Less living expenses ($50,000)

Year 3 = $155,000 etc etc

Although in fairy land you are getting 100% return on your account in the real world there is huge drag on your account. Throw in a drawdown year and your $100,000 starting capital isn't enough to survive by a factor of 10 although you are making mostly 100%!!

 

[craft]

My point about compounding in part goes like this,

year 1 = $100,000 * 100% = $200,000 less 30% tax (-$30,000), less cost (data, accountant etc, $2000), Less living expenses ($30,000)

Year 2 = $138,000 * 100% = $276,000 less 50% tax (-$69,000) less cost (data, accountant etc, $2000), Less living expenses ($50,000)

Year 3 = $155,000 etc etc

Although in fairy land you are getting 100% return on your account in the real world there is huge drag on your account. Throw in a drawdown year and your $100,000 starting capital isn't enough to survive by a factor of 10 although you are making mostly 100%!!

This is exactly why only using Compound Annual Rates makes any sense.

Starting capital base, ending capital base, non trading related withdrawals, capital additions, duration. The compound annual rate is the measure that balances it all out and allows sensible comparison.

 

[McLovin]

This is exactly why only using Compound Annual Rates makes any sense.

Starting capital base, ending capital base, non trading related withdrawals, capital additions, duration. The compound annual rate is the measure that balances it all out and allows sensible comparison.

I'd really love fund managers have to produce some sort of "after tax" return for a hypothetical tax payer. I think it would really be illuminating about how the constant churning employed by some managers degrades return.

 

[beachlife]

This is exactly why only using Compound Annual Rates makes any sense.

I cant leave this unanswered in case a newbe stumbles across it later.

For a super fund yes, to hide years like 2008 in the longer term averages, for a business no.

In business you measure your gross profit and then your net profit after expenses, and you compare both to last year, and as a return on your capital invested in the business, and you do it in straight % terms. Then the business pays it tax. Compounding is never included in business performance measures, neither is tax. After tax you then decide to retain profits as additional capital or pay a dividend, or a combination of both.

My OP was simply trying to get a measure of gross income potential before expenses, as a % of capital, for trading as a business.

 

[Trembling Hand]

My OP was simply trying to get a measure of gross income potential before expenses, as a % of capital, for trading as a business.

How long is your string?????

10K?
100k?
1 mil?
20 mil?

 

[skyQuake]

My OP was simply trying to get a measure of gross income potential before expenses, as a % of capital, for trading as a business.

lots of factors...
- As TH said, depends on how much capital you throw at it. In general higher amount of capital = harder to generate returns.
- Experience
- Whether you're retail or insto
- What the general market does
- How much work you put into it

As a guess, new traders make market returns - 5%. This figure is considerably worse in sideways/bear mkts.
Variance is high due to skill/luck/type of mkt