It’s not just about expected value (performance), but about risk adjusted performance. Because like I said, the marginal value of normal market returns for me is negligible.
So the cut-off for me would be at around 200,000AUD since I could buy a property in urban Australia outright then. I currently have 20,000AUD.
beat the market by that much
Actually I hadn’t thought this part through thoroughly. Thanks for findind this flaw! Argh. I would need 1000percent returns on my investment to make that much...
Now my strategy seems absurd. Can you think of anything I can do to make something like that?
I can think of many ways to increase your investment by 10x quickly, as long as you’re willing to accept more than 90% chance to lose it all.
More likely, you’ll need to supplement any investment with labor or other income. Your future earnings are (I hope) much much larger than your current savings.
I think that’s a fair analysis on further consideration of the comments I’m reading in this thread. If pro fund managers can’t do it, and even they lose to most index funds, what hope do I have?
But the question then remains: how do proprietary trading firms make their money above market rates? Is their only real strategic advantage their marketing and existing cash flows?
There are multiple ways. The most straightforward is luck. There’s high frequency trading. People like Carl Icahn make money by changing company policy. Quants have complex statistical models that sometimes pick up effects based on which they trade that are unknown to other market participants.
Some companies are likely illegally trading on insider information.
So are you talking about compoound interest on an alternative investment with greater certainty (fixed bank deposit)?
Hmmm. So if I made a modest 6 percent per year on my 20k, I can expect to have 200,000 in 40 years (without added additions). That doesn’t seem to match what a want, but then again that assumes I have zero net addition which I reckon is unlikely.
I get approx. 5000AUD a year from Centrelink, and don’t really spend it so lowers it to 17 years till house. This is an oversimplification since I donate to charity and will probably have a job that makes more money with a lifestyle that costs money but this gives me an upper bound. If instead I can add 10,000AUD per year to my investment I can get to 200k in 10 years which seems like an attractive prospect
the principle barrier to this is that now i have my money tied up in illiquid assets that are longterm in their strategy. If I liquididate now I could be seriously damaging future gains no. Maybe it’s best to wait for those stocks to appreciate then to sell them and place in an index fund (but a fixed deposit account is safer yeah?)
Most people do better by investing in an index fund than by picking individual stocks. What makes you think you are different?
It’s not just about expected value (performance), but about risk adjusted performance. Because like I said, the marginal value of normal market returns for me is negligible.
Show some math behind that. Where’s the cutoff between negligible and significant, and why do you think you can beat the market by all that much?
So the cut-off for me would be at around 200,000AUD since I could buy a property in urban Australia outright then. I currently have 20,000AUD.
Actually I hadn’t thought this part through thoroughly. Thanks for findind this flaw! Argh. I would need 1000percent returns on my investment to make that much...
Now my strategy seems absurd. Can you think of anything I can do to make something like that?
I can think of many ways to increase your investment by 10x quickly, as long as you’re willing to accept more than 90% chance to lose it all.
More likely, you’ll need to supplement any investment with labor or other income. Your future earnings are (I hope) much much larger than your current savings.
If you want to buy property the standard way is to take out a loan from a bank.
I don’t think there’s reason to assume that you get better returns in this case for the risk that you take in this case.
I think that’s a fair analysis on further consideration of the comments I’m reading in this thread. If pro fund managers can’t do it, and even they lose to most index funds, what hope do I have?
But the question then remains: how do proprietary trading firms make their money above market rates? Is their only real strategic advantage their marketing and existing cash flows?
There are multiple ways. The most straightforward is luck. There’s high frequency trading. People like Carl Icahn make money by changing company policy. Quants have complex statistical models that sometimes pick up effects based on which they trade that are unknown to other market participants. Some companies are likely illegally trading on insider information.
Consider the possibility that you may be discounting the future too much. Modest returns can add up to quite a lot on a timescale of several years.
(Aside from that, I agree with Protagoras.)
So are you talking about compoound interest on an alternative investment with greater certainty (fixed bank deposit)?
Hmmm. So if I made a modest 6 percent per year on my 20k, I can expect to have 200,000 in 40 years (without added additions). That doesn’t seem to match what a want, but then again that assumes I have zero net addition which I reckon is unlikely.
I get approx. 5000AUD a year from Centrelink, and don’t really spend it so lowers it to 17 years till house. This is an oversimplification since I donate to charity and will probably have a job that makes more money with a lifestyle that costs money but this gives me an upper bound. If instead I can add 10,000AUD per year to my investment I can get to 200k in 10 years which seems like an attractive prospect
the principle barrier to this is that now i have my money tied up in illiquid assets that are longterm in their strategy. If I liquididate now I could be seriously damaging future gains no. Maybe it’s best to wait for those stocks to appreciate then to sell them and place in an index fund (but a fixed deposit account is safer yeah?)