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What are the realistic returns one should expect from trading?

The greatest investor of the last century is Warren Buffett. He has made about 25% compound over 40 years. Some absolutely outstanding traders have beaten this rate for short periods in markets that were very conducive to trading. However, most of the best funds managers fall in the range of 15 to 20% return on assets over all market conditions. In your early years you should work on a lower return than this. It takes time to learn.

Does this rate of return sound low to you? It shouldn't. Think of it this way: Most great companies struggle to exceed 15% compound return on assets over any reasonable period including the full business cycle. If returns much in excess of this were possible by trading the financial markets, the best business brains in the country would shift into trading and arbitrage away the excess returns. The truth is that the returns are not greatly out of line with the best achieved in other businesses.

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