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What is a typical return per year ?


Hi all !

I am a new member of this forum, and also a newbie in trading stocks. I would like to ask one simple question:

What is (from your experience) a typical return on investment per year when trading stocks?

Reading some books about Warren Buffett, I found out that he averaged about 20% of return per year. Does the return depend a lot on the initial amount of money. Is it possible to get higher returns (year after year) when investing (trading) just about 10,000$ instead of millions? Is it realistic having 50% or 100% return year after year? Using which technique (swing and day trading or value investing?)?

Thanks!




It greatly depends...If every day in a year were like to day you could easily make 20% a month. I have a stock and options account for longer term and +2-10% a month is the norm for me. The taxes on stocks are a server drawback. You should search "carry trading" in the forex market for where you buy the currency with the highest interest rates (AUD, or NZD) and sell the currency with the lowest rate (JPY) for 12 months. This does much better than any stock account I have ever had. It did 240% last year. You get paid to switch money, the basic idea is that the currency with the best interest rates will do the best over a long period of time most use 12 months, there is also no switching in and out of trades which will eat profits, and cost more.
quote:
Originally posted by CharterJoe

It did 240% last year.



Hi Joe,

240% per year is really impressive. Is it possible to repeat such a result each year?

I have started with trading in November last year. Before August this year, I survived the crash of the market and ended with overall gain of 13%. Then, I started paying more attention in August and September. The gain in August was 10%, while in September (1 day left) is about 13%. Altogether, the gain for this year is about 40%. Would you tell me, is it realistic to expect a gain of about 10% per month for EACH month, only trading stocks (no short trades, just long positions. No day trading, but focusing on weekly and monthly swings. No options, no currencies).

Concerning taxes, I live in Spain and it seems that taxes are just 18% of the gain.

Thanks a lot for your reply and have a nice day,

Igor
quote:
Is it realistic having 50% or 100% return year after year?

....

240% per year is really impressive. Is it possible to repeat such a result each year?




...anticipating the smoke coming off Jim Kane's keyboard....
quote:
Originally posted by pt_emini

quote:
Is it realistic having 50% or 100% return year after year?

....

240% per year is really impressive. Is it possible to repeat such a result each year?




...anticipating the smoke coming off Jim Kane's keyboard....





Of course its possible, anything is possible the question one needs to ask is, is it likely? When things enter the equation like trading on to much margin, or margin in general. Trading with bill money or kids school money, watching every tick, Needing the ES to go down 8 points to keep the lights on and food on the table...things like that will effect your bottom line.

Just because most phd's in finance can't make 5% a year with 10billion dollars does't mean someone with a 25k account can't make 5-10% every month in stocks, options, ES, FX what ever.
quote:
Originally posted by pt_emini

quote:
Is it realistic having 50% or 100% return year after year?

....

240% per year is really impressive. Is it possible to repeat such a result each year?




...anticipating the smoke coming off Jim Kane's keyboard....


You are too funny. That one really got a laugh out of me. Thanks.
typically you probably end up losing money
quote:
Originally posted by igorvragovic

Hi all !

Is it realistic having 50% or 100% return year after year? Using which technique (swing and day trading or value investing?)?



Congratulations on your initial success. I wish you continued success.

Personally (that is for myself) I don't care for the phrase "realistic goals". I am working on the market as a way to learn and grow as part of my spiritual path. A few people have achieved extraordinary success year after year.

I my wall is a hanging with the words
"If you can dream it you can achieve it."

Expect the best and also realize that a drought can happen.

If you double your capital then why not take 1/3 out of your trading account and set it aside? If you continue to perform you will soon replace it.

Continue this each time you double your capital. Just a suggestion


Best of luck!



quote:

If you double your capital then why not take 1/3 out of your trading account and set it aside?



Hi Blue,

thanks for the support and optimistic words. Concerning your advice, wouldn't it be better just to leave all the money in the account and let it compound further?

Few words about my method. Well, it is quite basic and simple. Perhaps too simple (or too risky?). I just look for several stocks that are close to their long-term minimums (I mean, checking their charts for the last 3 to 10 years). They are close to support lines and had negative profitabilities during the last week, month and year. Then I check if everything is OK with their fundamentals (earnings, P/<E>, P/B, current ratio, asset turnover, etc.), if few technical indicators are OK (like, touching lower Bollinger band, or oversold slow stochastics, ...), look if there was a trading range during the last several months and what was it width (to check if a stock is volatile enough to go up by 10%) and then I just buy it. I buy it and hold it for a week, for a month or sometimes longer than 2 months. Some of them gave me returns of just 3%-5%, other about 10%, and few of them of almost 20%. I am limited to trade only Nasdaq100, Nyse100, Ibex - Mercado Continuo (low commissions) and Eurostoxx50 (my broker does not offer more) - but I got very nice returns in the last 2 months. Perhaps, it is better to play only with large stocks (they should not declare bankruptcy very often)? August return was +10.33% and October return +12.38%. Altogether in 2 months = +23.99%.

P.S. is this forum the right place to post messages of this kind ?


I do something very similar...but I look at sectors, find the leading sector and then pick the leaders out of the leading sector. You are correct its a very simple system I have been doing it since Jan this year and have had good returns. I don't use margin, and I don't use stops or targets with this method.

Hi Igor,

Of course the decision is yours.

A potential problem most newer investor have is that with limited experience they feel that they have the market under their belt after a few months. You get that "oh this is easy, I have this thing mastered."

However, they have traded one system under one set of market conditions. If the market changes and their system needs to change but the investor doesn't recognize it, then they will continue doing what has previously been successful and start to lose (and usually go into a state of denial and continue to lose).

I don't know how much money you have and if you lose the capital you are working with if you need to stop investing, but that is the case for many investors.

Then when they get the experience they have no capital left and are forced to take bigger chances than they should.

One always need to know under what conditions will my system work and under what conditions will it not work and how will I know when those conditions have changed?

Large companies can go bankrupt, market darlings turn out to be ugly witches. (Enron, Nortel etc.).

Igor, why don't you get a graph of the market (perhaps one that represents what you trade) and post it with trendlines you have drawn on the graph and I will explain further about what I just wrote.

-----------------------

In short, no I don't think you should let it all ride, or as Mart so succinctly put it "typically, you'll end up broke."

If you have 10k double it to 20K and then take out 1/3 you have $13,340 (and $6,660 in your cash reserve).
If you can double it again to $26,680 then remove a third you have $18,000 (and $15,340 in your cash reserve).
One more time double to $36,000 take out 1/3 to $23,750 and ($27,590 in your cash reserve).
---I did some rounding as I went along---

Many very experienced investors have continued to "let it all roll" and then been wiped out. If greed overtakes you then your downfall is soon to come.

"Pride goeth before the fall." (Excessive self-pride proceeds the fall).

I suggest you read Jesse Livermore's book, Reminiscences -of a Stock Operator.
It's in most libraries and on this site:
Reminiscences of a Stock Operator

-----------------
You mentioned "had negative profitabilities during the last week, month and year. Then I check if everything is OK with their fundamentals (earnings, P/<E>, P/B, current ratio, asset turnover, etc."

A question: negative profits doesn't match with good earnings and good PE. Perhaps you meant something else?


quote:
Originally posted by day trading

What is deceptive is that it's very very difficult to make 1 point a day. (In this case I'm talking about 1 ES point.)



Ouch ain't that the truth!