I was inside our Freedom Trader private Facebook group the other day and I was asked this:
“What Returns Should I Expect from Trading?”
Many newbies come into the markets after attending these get-rich-quick type programs and expect extremely high returns right away because of misinformation they’ve been fed.
When I mean high returns, I’m talking about making ‘a killing’ and going out to get buy your first Ferrari, having your own boat, travelling first class around the world, buying your own mansion with private butlers etc.
Well, I am here to tell you that this is far from reality.
The Truth Behind The Best Traders And Fund Managers On The Planet
What most don’t realise is that the best, and I mean the very best on the planet do between 15-30% p.a sustainable over decades.
Their percentage gains do not seem very impressive, but compounded over decades, their net wealth has grown into the billions. What is most impressive is that, at no point in time did they ever had the risk of losing a significant portion of their wealth to get there. If they did, they probably would not be here today and I wouldn’t be writing about them.
My own record has always been between 15-25% p.a. Some years they were 35%p.a plus, but I happily admit they are not normal and it is these times which I start to examine if there were any excessive risks I may have taken without knowing.
People forget that almost 90% of professional fund managers who invest for a living don’t even beat their respective index, so if you as a private trader can either match or beat the index continuously, give yourself a pat on the back because you are already in exceptional company.
How You Can Achieve Returns Like The World’s Best
So how can you work towards achieving returns like the worlds’ best?
Shift your mindset to ‘risk adjusted’ returns and not just the returns themselves.
When I use the technical jargon ‘risk adjusted’, I simply mean how much risk you took to reach this return. Did you leverage far too much to get there and at any point in time, were you always safe from ever losing say more than say 5-10% of your total account overnight?
If you did, then your risk to get the returns may be too high.
Of course, everybody’s risk tolerance is different. Some people do not mind risk and happily risk up to 50% of their account to make the returns they seek. Personally, I believe this is far too high. I actually do not like seeing my account have more than a 5% drawdown at any point in time so I constantly seek to minimise risk in everything I do, even if it means lowering my short-term return expectations.
Aim To Beat The Indexes (Continuously)
So in summary, aim to firstly beat the indexes continuously. Sometimes this may not happen (even Warren Buffett has lagged the indexes many times during his career), so don’t be too harsh on yourself when this happens. Once you beat the indexes, aim for consistency rather than exceptional returns one year and lose your shirt the next.
Allow compound interest to do its magic over time because it does.
So, what I’d love you to do right now is, to like or share this if you found video this helpful.
And also tell me in the comments sections, What’s been the most useful for you?
If there’s anything I can do for you right now to help you with your investing and trading, please, type it in. I’d love to know.
Talk to you soon!