Realistic Rate of Return?

[beachlife]

be in the embarrassing position of having to tell friends and family you failed and have to rejoin the work force.

Nothing embarrasing about that at all. I retired from work at age 35, the GFC meant I had to go back to work until now, no one laughed, well no one that matters to me. To me it's more laughable to go to work every day hoping that one day you would have paid off your home and saved enough to retire.

Im the process of finalising my last contract and will quit the work force again. My only source of income will be the markets. If I have to go back to work next year, I dont care, at least I would have had another year off, unlike any one that will laugh.

By the way I was able to retire at that age because I ignored everyone that said it couldnt be done and just went and did it anyway.

As they say, if you dont aim high you are guaranteed to never hit that target, but if you aim high, you just might hit the bullseye.

 

[Value Collector]

- the GFC meant I had to go back to work until now,

-By the way I was able to retire at that age because I ignored everyone that said it couldnt be done and just went and did it anyway.

As they say, if you dont aim high you are guaranteed to never hit that target, but if you aim high, you just might hit the bullseye.

- With the strategy I laid out the fact you would have had 3 years buffer meant you would have survived the gfc down turn and given you the time to really profit from it.

- I am not discouraging you, I am a full time investor myself, and am in my early 30's. I was just suggesting a strategy that should stop you being one of those guys that gets wiped out and has to start again if you have a bad year (or two).

 

[Trembling Hand]

- With the strategy I laid out the fact you would have had 3 years buffer meant you would have survived the gfc down turn and given you the time to really profit from it.

- I am not discouraging you, I am a full time investor myself, and am in my early 30's. I was just suggesting a strategy that should stop you being one of those guys that gets wiped out and has to start again if you have a bad year (or two).

VC as a short term trader the gfc was heaven. If you have a higher trade frequency draw-down periods are normally limited to weeks and/or a month or two rather than years.

I do know where you are coming from because I know few who have stuck in the trading game through market phase changes. And I agree 100% the best chance of long term survival is not needing this month to be positive to enable you to pay the rent. Funnily enough of the derivative traders I have know, which is quite a few, just about 100% that are still in the game as strong as they where 10-7 years ago are trading prop.

 

[beachlife]

- With the strategy I laid out the fact you would have had 3 years buffer meant you would have survived the gfc down turn and given you the time to really profit from it.

- I am not discouraging you, I am a full time investor myself, and am in my early 30's. I was just suggesting a strategy that should stop you being one of those guys that gets wiped out and has to start again if you have a bad year (or two).

Investor is the key word, the thread was asking for returns of traders, who as TH says, would have shorted the GFC for good returns (very rare that I agree with him). At that time my focus was property so I missed one of the biggest opportunities in recent history, but suspect another is just around the corner.

Being in your 30's with your own home paid off, with 3 years wages in a high interest bank account (where are they?), and on top of that enough capital invested in the market to live off an 8% return then I tip my hat you. That's an awesome position to be in.

I was once very close to being in the same position, but not any more and the strategy you suggest requires so much savings that it's beyond the reach of most people.

 

[Value Collector]

VC as a short term trader the gfc was heaven.

It was heaven for me too, The GFC is what allowed me to build the holdings I have now.

 

[Value Collector]

-Investor is the key word, the thread was asking for returns of traders, who as TH says, would have shorted the GFC for good returns (very rare that I agree with him).

- At that time my focus was property so I missed one of the biggest opportunities in recent history, but suspect another is just around the corner.

-Being in your 30's with your own home paid off, with 3 years wages in a high interest bank account (where are they?), and on top of that enough capital invested in the market to live off an 8% return then I tip my hat you. That's an awesome position to be in.

-I was once very close to being in the same position, but not any more and the strategy you suggest requires so much savings that it's beyond the reach of most people.

- similar principles apply, just because you label yourself a trader does not mean you will outperform investors, And just because you are an investor doesn't mean you will have low returns, I suggest 8% as a conservative figure, for safety.

- If you were retired, living off property how did the gfc force you back to work.

- High interest bank accounts don't have the high interest they used to have, but I was talking about the likes of ING etc, I personally hold my "wage saving" and other savings in a mortgage interest offset account I have attached to some property investment loans I have.

- Not really, The way I look at it, If you are able to earn the high trading returns your looking for, you should be able to compound you existing capital position to get to my position in a number of years, If you can't compound to get to my position in 10years or less, then your not earning the high returns that would justify trying to live of a small capital base in the first place.

for example if your going to earn 50%, it will turn $100,000 into $2,500,000 in 8 years, So you could keep the $100,000 capital base and live off $50,000 a year, or you could keep working and compound it to set yourself up in a really rock solid position.

 

[Value Collector]

A close friend of mine was trading for about 2.5years on a capital base of $150,000 in the run up to the GFC, his operation blew up and he and his wife were forced back to work, This is the main reason I kept hard at it for longer than I probably had to, to make sure I was set up properly.

I am not saying it was easy, but me and my partner did,

 

[beachlife]

- similar principles apply, just because you label yourself a trader does not mean you will outperform investors, And just because you are an investor doesn't mean you will have low returns, I suggest 8% as a conservative figure, for safety.

- If you were retired, living off property how did the gfc force you back to work.

- High interest bank accounts don't have the high interest they used to have, but I was talking about the likes of ING etc, I personally hold my "wage saving" and other savings in a mortgage interest offset account I have attached to some property investment loans I have.

- Not really, The way I look at it, If you are able to earn the high trading returns your looking for, you should be able to compound you existing capital position to get to my position in a number of years, If you can't compound to get to my position in 10years or less, then your not earning the high returns that would justify trying to live of a small capital base in the first place.

for example if your going to earn 50%, it will turn $100,000 into $2,500,000 in 8 years, So you could keep the $100,000 capital base and live off $50,000 a year, or you could keep working and compound it to set yourself up in a really rock solid position.

I had negative geared rentals, a poorly timed purchase of new family home all being cash flowed by a renovation strategy. The market died, my reno projects couldnt sell, cash flow stopped, interest rates went up every month, all investments had to be sold for less than what they were valued at pre GFC, tax on cap gains then had to be paid and it's all gone. 10 years of investing gone in 12 months, along with about $1.2m in 'paper' equity. Managed to save the family home, but that's all. With the market dead, and banks not lending, reno's for cash flow were no longer possible, so I had to go back to work for cash flow. I still dont exactly know how so much equity just evaporated, but it did (based on bank valuations not agent opinions).

Yes my stragegy will compound nicely from a low base, but not at the rate you suggest due to tax and living exp deductions, but 8% pa on $100k wont even cover food. To earn say a wage of $100k from an 8% return you need $1.2m, which by your recommendation needs to be saved from after tax income - impossible for most.

I only know one person in your position at your age, he was a real estate agent that built a business and sold out before the GFC. I dont know any wage slaves that come close to being able to quit their jobs and invest for a living on the terms that you recommend.

- - - Updated - - -

A close friend of mine was trading for about 2.5years on a capital base of $150,000 in the run up to the GFC, his operation blew up and he and his wife were forced back to work, This is the main reason I kept hard at it for longer than I probably had to, to make sure I was set up properly.

I am not saying it was easy, but me and my partner did,

If they blew up during the GFC then they were buy and hold investors, not traders.

 

[Value Collector]

-Yes my stragegy will compound nicely from a low base, but not at the rate you suggest due to tax and living exp deductions, but 8% pa on $100k wont even cover food. To earn say a wage of $100k from an 8% return you need $1.2m, which by your recommendation needs to be saved from after tax income - impossible for most.

- I dont know any wage slaves that come close to being able to quit their jobs and invest for a living on the terms that you recommend.

-If they blew up during the GFC then they were buy and hold investors, not traders.

- Well tax is a reality whether you are compounding it or spending it. But I think your missing the point, I am not saying save $1.2M from wages. I am saying compound your starting capital while you are still working earning money somewhere else, If you get high returns it shouldn't take you that long, if you can't get the high returns you had no chance with the small capital base.

- you made a mistake being under capitalised in your property business, I am just warning against repeating that same low capital mistake and also as I said planning on 8% just gives you a margin of safety, you don't want to plan on driving a 20 tonne truck every day over a bridge designed to carry 20 tonnes, you want to build a bridge that can carry 40 tonnes.

- Firstly I think wage slave is a bit of a derogatory term I start out by saving money from my wages at a young age, But end up owning a business in sales that did very well, I lived off a fraction of what I was earning and compounded the savings, selling the business funded my 3 years wage account.

- If you think only buy and hold investors were hurt your crazy, In fact buy and hold investors that actually held right through probably did very well ( my mum didn't sell a single share between 1996 and now and her portfolio is well above pre gfc levels the gfc actually helped her dividend reinvestment plan buy more shares). From memory may mate was trading stocks and he was also using options, he was not a long term buy and hold guy.

As I said - Planning on 8% is just a safety thing, I am not actually saying aim for 8%, aim for whatever you can get, but if your setup to be good at 8% you'll sleep happy,

 

[Ves]

As I said - Planning on 8% is just a safety thing, I am not actually saying aim for 8%, aim for whatever you can get, but if your setup to be good at 8% you'll sleep happy,

I agree with the sentiment that you've made in this thread.

If your emphasis is on savings rate (ie saving a high proportion of your income - 50%+) then an 8%pa return compounded will add up really quickly. If you do the maths, and save 50% of your income from age 21 to age 35-40-45, then some form of semi-retirement does not seem completely impossible as long as someone can achieve satisfactory returns (not even super normal), say 8-10%, which the market generally does over the long-term in a lot of cases. You will not live a life of luxury, or be able to spend in amounts above the average person, but quality of life will still be reasonable, especially if you embrace freedom. It requires some sacrifices earlier in your adult life (and in a lot of cases you will need to delay having children and if you do want children you need higher returns to support a higher cost base), but as with everything in life there are trade-offs. It is possible, but only if you want it.

My emphasis is on risk-adjusted returns. Gaining that 8-10-12% pa with the least risk possible. Generally that requires me buying stable companies at a discount to their intrinsic value using a high discount rate. Lots of other things I avoid, but don't really want to bore anyone with that in this thread as I realise this is mainly for traders not investors.

 

[beachlife]

No this what you said and I am just trying to figure out how Mr & Mrs average wage earner could ever achieve it.

consider yourself ready to be a full time investor / trader when you have large enough working capital base that you could live the way you like from based on it earning 8% for you.

They way I personally prefer is to do the following.

1, Own your own home debt free.

2, Have 3 years living expenses in a high interest bank account.
.

So I read that as saying that anyone that wants a $100k income needs to wait until they have paid off thier home loan, saved $300k into a bank acc and have somehow built a working capital base of $1.2m, which of course would be all after tax.

My problems werent from being under capitalised, I had plenty of equity and was never called by the bank, my problem was a cash flow problem because the real estate market stopped and banks stopped lending. These problems will never occur in trading.

 

[Value Collector]

No this what you said .

Please don't chop of the first half of my sentence when quoting me, I began the sentence with,

"I think for the sake of conservative forward planning"

So, I was saying, be conservative or in other words "safe".

 

[Value Collector]

- figure out how Mr & Mrs average wage earner could ever achieve it.



-So I read that as saying that anyone that wants a $100k income needs to wait until they have paid off thier home loan, saved $300k into a bank acc and have somehow built a working capital base of $1.2m, which of course would be all after tax.

-My problems werent from being under capitalised, I had plenty of equity and was never called by the bank, my problem was a cash flow problem because the real estate market stopped and banks stopped lending. These problems will never occur in trading.

- Spending less than they earn and put the savings (10 - 15% of earnings) into balanced investments over their working life, if you do this for thirty years you should be able to retire, mr and mrs aveverage shouldn't have a problem retiring at 55 if they did that.

- If you have paid off your home, you probably don't need $100K to live off. And if you are paying rent or a mortgage and still want $100K spending money your going to need a larger capital base anyway.

- You were under capitalised, other wise you wouldn't have been be negatively geared, relying on loans. Basically if your property investments are generating negative cashflow, your under capitalized.

 

[Trembling Hand]

If they blew up during the GFC then they were buy and hold investors, not traders.

You couldn't be further from the truth. I'm replying to this with some reluctance but certantly good intentions....here goes anyway...

Many very good traders got taken out during the GFC and then post GFC once volatility dried up. Very good traders. Basically all the locals on the SPI who had been there since electronic settlement started for example have, if they are smart/lucky, moved onto something else while others blew to bits. Really good traders, 100-300 lot locals (thats position size worth up to 40 mil per clip). Responsible for 100s of millions of dollars of turnover per day just in 1 instrument alone. You have not gone through a market change as yet and if you are at all as smart as you keep telling us you would drop such blind notions as to how hard it is to last long term in this game as a trader.

Believe me markets change just as you gain confidence and step up size. Been there done that -seen it 4 or 5 times. You will not be trading the same way as you trade now in 3-4 year if are lucky to recognise it and honest enough to change, that is if you are trading at all.

 

[payday]

You couldn't be further from the truth. I'm replying to this with some reluctance but certantly good intentions....here goes anyway...

Many very good traders got taken out during the GFC and then post GFC once volatility dried up. Very good traders. Basically all the locals on the SPI who had been there since electronic settlement started for example have, if they are smart/lucky, moved onto something else while others blew to bits. Really good traders, 100-300 lot locals (thats position size worth up to 40 mil per clip). Responsible for 100s of millions of dollars of turnover per day just in 1 instrument alone. You have not gone through a market change as yet and if you are at all as smart as you keep telling us you would drop such blind notions as to how hard it is to last long term in this game as a trader.

Believe me markets change just as you gain confidence and step up size. Been there done that -seen it 4 or 5 times. You will not be trading the same way as you trade now in 3-4 year if are lucky to recognise it and honest enough to change, that is if you are trading at all.

TH - can I ask why those traders blew up during the GFC if you know? Did they argue with the market and keep buying the dips or was it the extremely volatile nature of the markets during that period that just played havoc with their stops etc? Just seeing if there is a lesson in there for me to learn and observe. Thanks

 

[beachlife]

- Spending less than they earn and put the savings (10 - 15% of earnings) into balanced investments over their working life, if you do this for thirty years you should be able to retire, mr and mrs aveverage shouldn't have a problem retiring at 55 if they did that.

You have missed the whole point. The thread title isnt how to save enough to retire on at age 55.

The point of the thread was to find out what returns derivatives traders that trade for a living are making, that is, those that have replaced their day job income with trading income.

The thread has nothing to do with long term retirement planning for wage earners.

 

[beachlife]

Just seeing if there is a lesson in there for me to learn and observe

I have blown up a few accounts in my time, the reasons were.
1. Risk per trade too large.
2. Stops too tight.
3. Trying to bottom pick (trade against under lying trend)
4. Trying to trade 1min to 15 min charts. (that was really dumb, the whole point of stopping work is to get away from the computer, not remain glued to it for a living)
5. Removing futures stops in night market - that account was wiped out in one over night move.
6. Doing what I was taught at expensive seminars.
7. Trying to let winners run.
8. Trading options.
9. Trying to get in on a break out early.

What I do now.
The opposite of everyting above.

I am now in a position where I am happy to trade for a living without the safety net of any other form of income.

 

[Trembling Hand]

Non of those reason are why good traders blow up and get taken out of the game. They are the reasons why crap traders never make it to 1st base.

 

[beachlife]

Non of those reason are why good traders blow up and get taken out of the game. They are the reasons why crap traders never make it to 1st base.

How can any trader that blows up be considered to have been good?

 

[Valued]

Were you writing options or something beachlife? You would have to be trying pretty hard to get wiped out on long calls or puts unless you used far too much risk per trade.

To be a professional trader for decades, I suppose you have to be able to trade more than just one instrument in one market. What if certain markets close due to disaster? You have to be able to trade multiple instruments in multiple markets.