Ask Colin

Could you please give me an indication of the sort of annual average percentage return I might expect to get if I start trading?

This is an imponderable question, which depends on many things. Assuming that you have adequate capital (at least $50,000), but no prior experience, your task will be to avoid losing too much in the first two years while you are learning. Perhaps you might then work on making 5% on average for the next three years. By then you will have given up or become successful and could expect a return between 10% and 15%, if you are good. All of this is highly contingent on what the market conditions are like. If the market trends strongly, you might beat those figures, but in tough sideways markets, you could do a lot worse.

You then said: I would not want to commence full time trading unless that return could provide a sufficient income.

I have discussed this several times in detail in my newsletter, articles and in the Ask Colin section of my website. Please read those discussions so you will clearly understand how to calculate the amount of capital that you need to make a living from trading. That is far more important than the rate of return in making an initial decision.

Elsewhere I have said that in my experience it takes five to ten years to learn to make consistent profits from trading or investing. In this period the focus should be not on rate of return but preservation of capital.

Of course, everyone thinks they are different and that trading and investing are easy. If you get to the level where you have a long term compound return of 15%, you will be a great investor. Your return on capital will also exceed most companies listed on the stock exchange. I earnestly suggest that you aim a bit lower until you establish a track record. Do this while maintaining an income from your day job. When you have enough capital AND have a track record that includes periods of difficult markets, then think about trading full-time. You will have no difficulty finding other opinions, but I believe what I have told you is the reality from my experience and from talking to, and reading about, countless people who have tried it. There are a small number of people with a gift for investment and trading. For everyone else it is a long hard journey to real and consistent competence.

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