Wanted: 10% average return over next 18 years

[Ultramagnetic]

Yes I am aware. My mortgage will be paid off in 15 years. I have no other debt. Thanks.

Sooner if I can convince my misses to move out of London

 

[Sonicscooter]

Have you had a mortgage statement showing the estimated interest you will pay between now and it's finish, mine frightened me, though that was ten years ago when rates were alot higher, paid mine off, hate debt.

Shane.

 

[timsk]

Sooner if I can convince my misses to move out of London

Hi Ultramagnetic,
You've made clear earlier in the thread in reply to alexaherself that you favour a more liquid asset in preference to bricks and mortar. However, the disclosure that you have a mortgage with 15 years to run means that, in effect, you're already heavily invested in - and committed to - property. I was in a very similar position that you're in now around 20 years ago. At the time, I read a book that examined the benefits of compound interest which, until then, I'd never given any thought to. It blew me away and I followed its advice by ratcheting up my savings to pay off my mortgage at the earliest possible opportunity. The debt reduced, along with the interest payable on the outstanding balance due, while my savings soared. Without doubt, it was the best financial decision of my life.

My advice to you would be to get rid of your mortgage debt asap and then - and only then - consider other asset classes and investment opportunities. Interest rates can only go up from here, so reducing your mortgage as much as possible as fast as possible would be my number one priority if I were in your shoes. Trust me, when you pay off that final chunk of mortgage, you'll be buzzing for days, weeks even. I know I was, and the positive impact it will have in terms of life choices down the line will be massive.
Tim.

 

[Ultramagnetic]

Hi Ultramagnetic,
You've made clear earlier in the thread in reply to alexaherself that you favour a more liquid asset in preference to bricks and mortar. However, the disclosure that you have a mortgage with 15 years to run means that, in effect, you're already heavily invested in - and committed to - property. I was in a very similar position that you're in now around 20 years ago. At the time, I read a book that examined the benefits of compound interest which, until then, I'd never given any thought to. It blew me away and I followed its advice by ratcheting up my savings to pay off my mortgage at the earliest possible opportunity. The debt reduced, along with the interest payable on the outstanding balance due, while my savings soared. Without doubt, it was the best financial decision of my life.

My advice to you would be to get rid of your mortgage debt asap and then - and only then - consider other asset classes and investment opportunities. Interest rates can only go up from here, so reducing your mortgage as much as possible as fast as possible would be my number one priority if I were in your shoes. Trust me, when you pay off that final chunk of mortgage, you'll be buzzing for days, weeks even. I know I was, and the positive impact it will have in terms of life choices down the line will be massive.
Tim.

Thanks Tim.

Yes I did say I favour more liquid investments, but I can't live in my liquid assets . I don't care what my house is worth in 15 years, it will be a rent free place to live.

That being said I have considered what you suggest. If I diverted my pension saving into my mortgage I would pay it off in 10 years rather than 15.

It would be a great feeling having no mortgage but eight years is not enough time to achieve anything savings wise. If the stock market is to continue it long upward march decade after decade (and I don't think it will) surely I need to get in as soon as possible?

 

[Sonicscooter]

So basically you have zero investment experience, you have a mortgage, so at the very least you would need to beat the compounded interest on that for a start...........would common sense not dictate to start with the easy options first?

 

[Ultramagnetic]

So basically you have zero investment experience

Millions of people have zero investment experience and save for retirement. It doesn't take brain surgery experience to pump money into an ETF each month.

would common sense not dictate to start with the easy options first?

You seem to think so. I don't, for reasons I mentioned. Interest rates are very low btw, you must have noticed. The returns on investment are also compunded, you must have noticed this too.

 

[Ultramagnetic]

Millions of people have zero investment experience and save for retirement. It doesn't take brain surgery experience to pump money into an ETF each month.



You seem to think so. I don't, for reasons I mentioned. Interest rates are very low btw, you must have noticed. The returns on investment are also compunded, you must have noticed this too.

I did the sums, and as I suspected a 4% return on my investments per year will produce profits equal to the saving I would make on my mortgage.

Anything returning over 4% makes investing the rational decision.

 

[Sonicscooter]

Well, good luck..................end of chat.

 

[timsk]

I did the sums, and as I suspected a 4% return on my investments per year will produce profits equal to the saving I would make on my mortgage.

Anything returning over 4% makes investing the rational decision.

Hi Ultramagnetic,
I'm extremely surprised by this to the extent that I suspect you've not fully understood what I was suggesting (my fault I'm sure for not explaining it well enough!), or that your calculations may have gone awry somewhere. The only way this could possibly make sense would be if the interest earned on the investments exceeded that payable on the mortgage debt by a country mile. To achieve that, you'll need returns waaaaay way better than 4% p/a. Are you factoring in the money saved from paying interest for all the years - yes years! - after the mortgage is paid off?

The other key point to consider is that the mortgage debt is constant; it's not going to reduce and will, in all probability, get bigger (as interest rates rise). However, there's nothing to say that the market will do the same. In fact, over the next 15 years, whilst it's reasonable to assume it will end up being higher than it is today, in the interim there's likely to be a bear market that could last for years, during which your investments will go down. Have you factored this possibility into your calculations?
Tim.

 

[malaguti]

I must say I'm surprised by all this negativity
there is a certain thread which makes trading as easy as playing pitch and putt with returns way in excess of 4% per month let alone per year!!!
think of the compounding, the riches you could make
I say stick all your money in this method as its clearly being endorsed by its continuity on this site and let us all know when you paid off your mortgage..in fact remortgage..steal if you can...whatever it takes to get as much money together and then play trading off a 1min timeframe. you'll be stinking rich.
an expert giving master classes can't be wrong

 

[tomorton]

Hi trade2winners,

I plan to retire in 18 years, and it is becoming clear I have not saved as much as I should have at this stage and am in danger of not meeting my target.

I have £32,000 in a SIPP, as of this year will be adding £6,000 a year and fingers crossed will be able to keep this up for the next 18 years.

I have a target pot size of 500k, and to achieve this will need an average 10% return per annum. I know the stock market historically return 9% per annum, however I am not convinced this record will be reliable over the next few decades so am taking the risky decision to mange my money more actively (although not very actively).

Do you believe this is achievable? If so what sort of approaches should I be looking at to achieve this?

There is insufficient time for investment to produce the outcome you're looking for. Performance is unlikely to be as great as you need, and if things went wrong, there would be insufficient time to re-invest by the time it became clear your investments were going to under-perform and had to be dumped.

I can only recommend aggressive active trading. This offers the possibility of a strong annual % gain, including during times of market depreciation.

The odds are not great that trading will achieve the result you want, but investment definitely won't.

 

[BSD]

I can only recommend aggressive active trading. This offers the possibility of a strong annual % gain, including during times of market depreciation.

The odds are not great that trading will achieve the result you want, but investment definitely won't.

Don't like being negative but totally agree with that.

The only chances of getting rich quick - while for obvious reasons beyond the scope for most - are DIY Trading, the Godfather AND -Mother of all unlimited withdrawal ATM's available out there, or selling crack cocaine on a large scale, or running either an extortion racket or a string of high level hookers.

There ya go, now ya know.

 

[BSD]

To put that in perspective, almost no legal investment will provide you with annualised 10% / year the next 18 years.

But in short term trading, yes indeed you can make 20 - 40 % on your capital / month.

Not gonna be indefinitely compoundable as with growing funds you're gonna start moving the market at some point due to liquidity limits, but definitely long enough that you reach a point where money is never gonna be an issue again.

 

[dbphoenix]

The only chances of getting rich quick - while for obvious reasons beyond the scope for most - are DIY Trading, the Godfather AND -Mother of all unlimited withdrawal ATM's available out there . . .

Though one can also go bankrupt just as quickly.

Unless one has a thoroughly-tested and consistently-profitable trading plan, he will more likely gain greater pleasure from his money by gathering it all into a big pile and setting it on fire.

Db

 

[Sonicscooter]

Though one can also go bankrupt just as quickly.

Unless one has a thoroughly-tested and consistently-profitable trading plan, he will more likely gain greater pleasure from his money by gathering it all into a big pile and setting it on fire.

Db

 

[BSD]

Though one can also go bankrupt just as quickly.

Unless one has a thoroughly-tested and consistently-profitable trading plan, he will more likely gain greater pleasure from his money by gathering it all into a big pile and setting it on fire.

Db

Oh yes absolutely.

Trading is like everywhere else, many will feel called, but only a select few are chosen.

No question about that.

Same like starting a business etc etc.

Btw what I wrote about the possible returns vs compounding and eventual liquidity thresholds being exceeded is the reason why when you're running a hedge fund with Billions of OPM you can be extremely thrilled when you get an annualised 10 % a year over a long term track record with some consistence, in contrast to what some achieve consistently with small accounts.

 

[dbphoenix]

Btw what I wrote about the possible returns vs compounding and eventual liquidity thresholds being exceeded is the reason why when you're running a hedge fund with Billions of OPM you can be extremely thrilled when you get an annualised 10 % a year over a long term track record with some consistence, in contrast to what some achieve consistently with small accounts.

However, if one is trading OPM, the worst that can happen is that he gets fired.

In the final analysis, whatever anyone else earns or claims to earn is of no relevance to any given individual's prospects. His results will depend on the time and effort he puts in to studying, researching, practicing.

Db

 

[Solas0077]

Thanks for the VOO recommendation. Of course I had considered the cheap ETF index tracker option. It may be the way to go but for now I have doubts about the market continuing to yield the kind of returns we have become accustomed to seeing.

You are right to have doubts. It is very unlikely.

 

[NVP]

Hi trade2winners,

I plan to retire in 18 years, and it is becoming clear I have not saved as much as I should have at this stage and am in danger of not meeting my target.

I have £32,000 in a SIPP, as of this year will be adding £6,000 a year and fingers crossed will be able to keep this up for the next 18 years.

I have a target pot size of 500k, and to achieve this will need an average 10% return per annum. I know the stock market historically return 9% per annum, however I am not convinced this record will be reliable over the next few decades so am taking the risky decision to mange my money more actively (although not very actively).

Do you believe this is achievable? If so what sort of approaches should I be looking at to achieve this?

10% per annum over 18 years ?

if you genuinely have 18 years left to play then clearly any IFA will tell you to move a Significant % into equities as you have a lot of years to bear any bad ones .....in last few years you will move to a safer portfolio to protect any gains

assuming you take a balanced approach and load on equities I would then just look at the following ........

1/3 - good years
1/3 Neutral
1/3 - losing years

then pray the good ones come earlier than later

play with the % moves seen over the last 20 - 30 years and see what it brings

personally I believe you wont get a 10% average return over next 18 years ..........a little steep as a target for standard investing and remember for the last 25% of that period you will be advised to scale out of risk

we are talking mainstream investment here ........if you start to focus on trading for real ....allocating significant time and focus to your capital base and applying the right strategies you may get this return

10% return a year is peanuts to day traders ...........thats mega failure........an average of 10% a week is achievable to good day traders trading full time and with a lot of experience ...depends how much you want to push the % stakes used

N

 

[lawrence-lugar]

10% a year is definitely do-able. don't let other people tell you it's not, just because most likely they haven't achieved it.