The Exceptional Wealth Accumulation Ideas and Thinking Thread

[Mr J]

Software entrepreneur? What is his property investment track record? Without knowing more about him, I couldn't consider his opinion or actions to be any more intelligent than those of anyone else.

 

[--B--]

this is a great thread which ive thoroughly enjoyed reading.

the concept that one must take control of their own destiny appeals to me greatly. its the DOING that is difficult however i hold hope that pesistence will pay off.

Tech - you refer to minimising risk to the extent that fear is gone. this in my opinion is the key to giving oneself the chance to take the opportunities as they are presented. i am still trying to hone my skills however i belive that most success is achieved though this strategy as more and more opportunities are opened up. How does someone acquire the knowledge though? or is it the experience?

again, great thread.

 

[Uncle Festivus]

Define Exceptional Wealth? To me it's being included in the BRW Rich 200 or similar.

Perhaps the goal should be 'how to make a million in one year' for starters? A million isn't much these days, but it is in this climate? New fin year, put your strategies forward to be tallied in 12 months time?

When I first started trading/investing I had a 'shotgun' approach to most things ie having a bit on everything, but slowly I have come to realise that less is more by specialising in one thing ie a group of stocks like the ASX20; one currency pair like the USD/AUD; one commodity like gold.

It's not to say there isn't the discretionary trades on the hot bubble of the day, but patience for the right entry at the right time more than makes up for lot's of time consuming smaller plays. I'm sick of watching the screen all day & night, so now just do the nightly stock scan using Bullcharts and wait for the right opportunitym then start the accumulation phase, long or short.

I think the 'flation we have now is decidedly of the 'de' type while China exports wage deflation and lowers global living standards.

Oil will only rise due to currency aberations, not due to any underlying supply/demand price discovery mechanism.

In fact, commodities in general will only be rising because of a weak USD, which in itself will cap any meaningful global recovery.

For the poster above about nobody knowing gold would go from 250 to 1000 - if you do your homework things like this become screaming buys. The fact that the same conditions are not only present now but are several orders worse are still telling us there is still exceptional wealth to be made?

 

[Mr J]

you refer to minimising risk to the extent that fear is gone. this in my opinion is the key to giving oneself the chance to take the opportunities as they are presented.

Responsible capital management will maximise the chance of being around to take advantage of the opportunities, but I think heavy losses early on teach lessons that cannot otherwise be properly appreciated. For me it started with card counting, and I was significantly overbetting. The fluctuations were massive, and so were the multiple blowups. It allowed me to develop a lot of tolerance and patience, and I consider the experience invaluable. Of course that is personal and it might be better for some to not go through it, while others may not need it; for me it was a wake-up call.

 

[Timmy]

If you think that you haven't the tools to fix a problem then that's a good start, you need to set about getting new ones.

Re a few posts back.
This (in bold) is the point.
Hope this helps.

 

[skc]

To me there are 2 parts to the exceptional wealth ideas...

1. Identify the opportunity
2. Capture the opporunity with minimal risk

It is the bold part that is most difficult, and in most direct contradition to the notion of "exceptional" wealth.

(1) - Identify the opportunity
Assuming that peak oil is a great opportunity. It is not just a once-in-a-life time opportunity; it is, in fact, a great opportunity on a geological time scale.

(2) Capture the opportunity with minimal risk
One can buy oil futures, buy WPL, Shell, buy alternative energy shares etc etc. There are many ways to capture the opportunity.

But how do you minimise risk?

Can I use a stop loss and risk 2% of my capital? That will definitely not deliver exceptional result.

May be there are option products out there? But they are expensive to start off and will expire before the peak oil really hit?

I would really like to hear how risk minimisation can be done... while achieving exceptional wealth.

 

[skyQuake]

Can I use a stop loss and risk 2% of my capital? That will definitely not deliver exceptional result.

Incorrect.

This will probably not deliver exception results in the short term, but once in a while, a 'normal' trade will exceed all expectations and take you to the moon.

Sure if you're convinced enough about something, you can commit lots of capital, then hold & pray.

And just hope that markets will remain irrational shorter than you will remain solvent

 

[Mr J]

I would really like to hear how risk minimisation can be done... while achieving exceptional wealth.

Small size and massive volume. A good day-trader will make far more than a good investor, with far less and with smaller fluctuations in capital.

 

[skc]

Incorrect.

This will probably not deliver exception results in the short term, but once in a while, a 'normal' trade will exceed all expectations and take you to the moon.

Sure if you're convinced enough about something, you can commit lots of capital, then hold & pray.

And just hope that markets will remain irrational shorter than you will remain solvent

I guess it depends on how you define exceptional result. To me it is something along the lines of double / treble your entire capital.

To risk 2% and get 200% return, the market has to move 100 times your initial stop.

Using the oil example, say $70 a barrel with a stop of $10, then price of oil need to rise to $1000+. May be possible, but sounds quite a stretch.

Sure, if I had stop of $1, then oil only needs to go up to $170. This sounds realistic, but who's to say peak oil prices will happen before my stop is hit? This will rely a lot on good luck, even if you have correctly identified the opportunity.

I agree that a great 10R+ trade will happen if you position yourself correctly. But in this thread we are talking about "exceptional" result, not just a great result.

Again back to the oil example, it is a bit more realistic again to say if I'd risk 20% of my capital. In which case 200% return only require 10x my stop distance. We then fall into an argument about what constitute minimal vs acceptable vs substantial vs excessive risk.

Let's take identification of the opportunity out of the equation. Suppose God himself told me that oil price will rise to $250 per barrel.

How would you capture this opportunity? After you have done that, work back and see how much you were risking if GOD hasn't told you so. I would be delighted to hear if the risk can actually be considered minimal.

 

[skyQuake]

I guess it depends on how you define exceptional result. To me it is something along the lines of double / treble your entire capital.

To risk 2% and get 200% return, the market has to move 100 times your initial stop.

Or place 100 trades in a year..

Using the oil example, say $70 a barrel with a stop of $10, then price of oil need to rise to $1000+. May be possible, but sounds quite a stretch.

Sure, if I had stop of $1, then oil only needs to go up to $170. This sounds realistic, but who's to say peak oil prices will happen before my stop is hit? This will rely a lot on good luck, even if you have correctly identified the opportunity.

You can adjust how much capital to put into the oil trade. Say you want to put a 5% stop on your oil trade, but with the 2% rule, you can only allocate 40% of your capital to the trade. If oil hits $100 again thats a 42% gain on that trade or a 16% return on your total capital.

While the gains are not spectacular, the amount you can pour into this trade is thanks to liquidity. IMO you're better off buying some junior oilers. While the oil price is currently below their cost of production, they're very much like Out of the Money options - can run much harder than oil itself if oil does take off.

Again back to the oil example, it is a bit more realistic again to say if I'd risk 20% of my capital.

Agree, the 2% rule is portfolio risk or money u are prepared to lose. Sure prices can gap past stops at times esp if stops are tight, but if you're risking 20% capital, the 2% rule means u can have a stop loss of 10% on that particular trade.

 

[skc]

Or place 100 trades in a year..

You can adjust how much capital to put into the oil trade. Say you want to put a 5% stop on your oil trade, but with the 2% rule, you can only allocate 40% of your capital to the trade. If oil hits $100 again thats a 42% gain on that trade or a 16% return on your total capital.

While the gains are not spectacular, the amount you can pour into this trade is thanks to liquidity. IMO you're better off buying some junior oilers. While the oil price is currently below their cost of production, they're very much like Out of the Money options - can run much harder than oil itself if oil does take off.

Agree, the 2% rule is portfolio risk or money u are prepared to lose. Sure prices can gap past stops at times esp if stops are tight, but if you're risking 20% capital, the 2% rule means u can have a stop loss of 10% on that particular trade.

They are all true / valid opinion. But I am waiting for someone to show how to capture exceptional opportunity with minimal risk.

And I am not really talking about "doing 100 trades a year" type opportunity. I was assuming that we are talking about macro opportunities like peak oil, the china boom, historical low interest rate, great depression etc.

 

[Mr J]

But I am waiting for someone to show how to capture exceptional opportunity with minimal risk.

Short during a crash.

 

[skyQuake]

They are all true / valid opinion. But I am waiting for someone to show how to capture exceptional opportunity with minimal risk.

And I am not really talking about "doing 100 trades a year" type opportunity. I was assuming that we are talking about macro opportunities like peak oil, the china boom, historical low interest rate, great depression etc.

The point i'm making is that you'll never be 100% certain that THIS IS THE BIG THING. (if you are, then well done, and just hold it and sell your tulip bulb later)

With the gold example $250~$100, you can do 100+ trades easy jumping in and out of gold, and trading with your view (ie bullish) so you're only focusing on longs.

No-one has ever gotten rich and stayed rich from 1 big trade (except the gamblers). Better to have the hand of midas imo - reusable. Be they patterns in fundamental trades, or technical trades.

 

[prawn_86]

No-one has ever gotten rich and stayed rich from 1 big trade (except the gamblers). Better to have the hand of midas imo - reusable. Be they patterns in fundamental trades, or technical trades.

I think thats rather disputable.

FMG, PDN etc etc over the last 5 or so years have provided huge returns for those who bought and held (and monitored).

Perhaps that is one way this could be done. Spread your risk across X amount of small to micro caps and hope 1 (or more) hits it big. Educated gambling really.

 

[skc]

The point i'm making is that you'll never be 100% certain that THIS IS THE BIG THING. (if you are, then well done, and just hold it and sell your tulip bulb later)

With the gold example $250~$100, you can do 100+ trades easy jumping in and out of gold, and trading with your view (ie bullish) so you're only focusing on longs.

No-one has ever gotten rich and stayed rich from 1 big trade (except the gamblers). Better to have the hand of midas imo - reusable. Be they patterns in fundamental trades, or technical trades.

You know we are actually agreeing. Previous posts in this thread (not by you) has suggested that there are exceptional opportunities out there that can be captured with minimal risk to create exceptional wealth.

Let's just wait for someone to demonstrate how that can be done.

 

[tech/a]

I think thats rather disputable.

FMG, PDN etc etc over the last 5 or so years have provided huge returns for those who bought and held (and monitored).

Perhaps that is one way this could be done. Spread your risk across X amount of small to micro caps and hope 1 (or more) hits it big. Educated gambling really.

Yes you CAN do this.
And no its not gambling.

lets say I buy a 10c stock with a 1c risk.
It trades to 13c I raise the stop to 10.5c I now have NO RISK.

More later.

 

[mazzatelli1000]

Yes you CAN do this.
And no its not gambling.

lets say I buy a 10c stock with a 1c risk.
It trades to 13c I raise the stop to 10.5c I now have NO RISK.

More later.

I second this
Maintaining positive expectancy

 

[kingcarmleo]

I'm only a young amateur at 18 but I think there is plenty of opportunities around for someone of my age with a long term outlook. I am being aggressive in these times and positioning myself for the future rather than being conservative.

What do people think about buying the Yuan with a 5 year or so outlook? China seem destined to become an economic powerhouse that may well overtake the US economy somewhere in the future. Will their currency be worth a lot more in 5 years time than it is today? I am tempted to use a bit of capital to but the Yuan now. Any thoughts would be appreciated.

 

[el caballo]

I'm moving to Hong Kong to earn Chinese Yuan before they pull their fingers out of the dyke and the flood gates break open.

TH,

That's quite a step - best wishes with it!

 

[Mr J]

I think thats rather disputable.

FMG, PDN etc etc over the last 5 or so years have provided huge returns for those who bought and held (and monitored).

And some people win lotto. I'm sure the strategy works for some, but I doubt it is more profitable than any other strategy, risk management being equal.

lets say I buy a 10c stock with a 1c risk.
It trades to 13c I raise the stop to 10.5c I now have NO RISK.

There was initial 1c risk, so yes it was gambling. Otherwise it's like saying if we win a single bet, we're playing with the house's money. No, we're playing with our profit. We've had this kind of discussion though. If you admit there is some risk, then we can move on the defining gambling. The proper defintion of gambling (as opposed to the widely-held belief) is placing a stake on an uncertain outcome, regardless of whether or not it is +ev. The only way to not gamble is to bet on a certainty.

Maintaining positive expectancy

It's still gambling, though in my experience it is never productive to debate on the definition of gambling.

I'm only a young amateur at 18 but I think there is plenty of opportunities around for someone of my age with a long term outlook.

There are opportunities for all ages right now. I don't have my software open, but if I did there's a reasonable chance I'd place a trade, especially with the FTSE recently coming online.

I am being aggressive in these times and positioning myself for the future rather than being conservative.

Aggressive early is good, assuming that in the future your earning power will increase and easily make up for any early losses. Don't be too aggressive though - remember the hare and the tortoise, though blowing an account or two will probably do you good.

What do people think about buying the Yuan with a 5 year or so outlook? China seem destined to become an economic powerhouse that may well overtake the US economy somewhere in the future. Will their currency be worth a lot more in 5 years time than it is today?

Just my opinion, but I'd prefer my money tied up momentarily for a short-term gain than have to wait years to reap the reward. There's a lot of opportunity cost in long-term investments.