What do you think is a good trading return for equities?

[Trader11]

10 - 20% per trade????

 

[ceciltan]

I say enough to feed you and your family with a little for building up passive income would be a good return for trading.

 

[ginza7]

The question presumes that every trade is a winning trade, which is impossible.

Furthermore, you did not mention the risk for each trade. You will blow up in no time if you make 20% on your winning trades but lose 25% for those that do not make it.

What is your question leading to? Ultimately, what is your goal?

 

[Shiny Things]

10 - 20% per trade????

The return per trade isn't a good metric. A high-frequency liquidity provision strategy is going to have minuscule returns per trade - a fraction of a tick on average - but across a lot of trades; a long-term buy-and-hold strategy will have much larger returns per trade, but fewer trades.

The right benchmark is an appropriate equity index - the STI if you're trading Singaporean equities, the S&P 500 if you're trading US large-caps, the MSCI World if you're trading absolutely everything... and don't forget to include dividends!

If you can't beat an equity index + dividends (adjust for volatility if you like), then that's a sign that your strategy isn't that great.

 

[MikeDirnt78]

Shiny is right.

Long term investing with index stocks can already achieve 10% pa.

For individual stocks investing, you should aim 15-20% pa in the long term.

For short term trading, your account must grow 30-40% pa in the long term.

If you can't beat 30-40% pa through trading, you are better off working delivery at foodpanda or grab.

 

[Trader11]

Shiny is right.

Long term investing with index stocks can already achieve 10% pa.

For individual stocks investing, you should aim 15-20% pa in the long term.

For short term trading, your account must grow 30-40% pa in the long term.

If you can't beat 30-40% pa through trading, you are better off working delivery at foodpanda or grab.

I find people with large capital will have advantage when doing index. For poor dude like me, I will need more return in order to compound faster

 

[MikeDirnt78]

I find people with large capital will have advantage when doing index. For poor dude like me, I will need more return in order to compound faster

It doesn't matter high or low capital.

It's the performance that counts.

If you can perform with low capital, you can scale your skills with higher capital.

And to need high returns with small capital is not the correct approach. Your performance shouldn't be dependent on the size of capital.

 

[revhappy]

Shiny is right.

Long term investing with index stocks can already achieve 10% pa.

For individual stocks investing, you should aim 15-20% pa in the long term.

For short term trading, your account must grow 30-40% pa in the long term.

If you can't beat 30-40% pa through trading, you are better off working delivery at foodpanda or grab.

Your second line is an exception rather than a norm. 10% pa is a lot to just put money in the markets and do nothing. The last 10 years it has been easy. But I won't expect 10% pa in the next 10 years. No way.

Going forward, if you get 5-6% pa, it is great.

 

[MikeDirnt78]

Your second line is an exception rather than a norm. 10% pa is a lot to just put money in the markets and do nothing. The last 10 years it has been easy. But I won't expect 10% pa in the next 10 years. No way.

Going forward, if you get 5-6% pa, it is great.

You should be looking at longer term returns.

https://www.thebalance.com/rolling-index-returns-1973-mid-2009-4061795

 

[Shiny Things]

I find people with large capital will have advantage when doing index. For poor dude like me, I will need more return in order to compound faster

Yeah, but the line between "small capital" and "large capital" is higher than you think. It's pretty hard to imagine a strategy that would become capital-constrained anywhere less than about $10mio AUM (though I'd love to be proven wrong here!)

 

[revhappy]

I find people with large capital will have advantage when doing index. For poor dude like me, I will need more return in order to compound faster

Focus on your day job and try to increase your income. Dont focus solely on saving/investing. There is only so much you can save/generate returns from investment. But there is always room to increase your income, that is usually low hanging fruits rather than trying to take high risk with your money.

 

[Trader11]

Your second line is an exception rather than a norm. 10% pa is a lot to just put money in the markets and do nothing. The last 10 years it has been easy. But I won't expect 10% pa in the next 10 years. No way.

Going forward, if you get 5-6% pa, it is great.

Not everyone will get the average returns because they enter in different phases of the market. The 10% return is just a general guideline.

 

[DukeCS33]

Short term trading returns need to beat long term investing returns and I think that one needs to achieve at least 15 to 20% on a year on year basis. Otherwise one might as well sit back and just do passive etf investing. Short term trading is a lot of hard work. Intraday scalping maybe not so much if one has a methodology of focusing on only momentum stocks - setting a screener to identify such stocks to trade on a daily basis to automate some of the menial work. However, intraday scalping requires one to have a greater level of price action reading and execution skill to be successful. One would also need a capital that allows one to minimise the transactional costs as a % to efficiently trade else, your edge would just be eroded by brokerage commissions.

 

[revhappy]

Short term trading returns need to beat long term investing returns and I think that one needs to achieve at least 15 to 20% on a year on year basis. Otherwise one might as well sit back and just do passive etf investing. Short term trading is a lot of hard work. .

Shouldn't this be dependent on volatility? In times like this when vix is artificially subdued due to massive stimulus, it is no brainer that just being long on the index wins.

If markets were not so distorted, then you could go long/short and make money. Now it is just follow the fed. Don't fight the fed, mantra. It is better to just either stay long or stay out and wait for the Armageddon.

We have so many hedge funds who did well in the past are now closing down, because it just doesn't work in this type of markets.

 

[DukeCS33]

Shouldn't this be dependent on volatility? In times like this when vix is artificially subdued due to massive stimulus, it is no brainer that just being long on the index wins.

If markets were not so distorted, then you could go long/short and make money. Now it is just follow the fed. Don't fight the fed, mantra. It is better to just either stay long or stay out and wait for the Armageddon.

We have so many hedge funds who did well in the past are now closing down, because it just doesn't work in this type of markets.

It really depends on how you adapt your trading strategies to the prevailing market conditions. I had a good run with counter trend trading strategies over the last few months while my swing trading did not work as well as compared to the prior years. Nowadays, I do not classify strategies or adapt them with the type of market conditions. I went back to basic price action and volume analysis and when there is a trade, I would take it in the direction of the trend or countertrend if there are no discernible trends. Basically, identifying support and resistance point and deciding if they provide me a good level to base my stops. I also screen entries based on volume spread analysis - what was the background, and what demand and supply bars are telling me of the state of the market and if there is a trading opportunity with a risk reward skewed in my favour. Something which did not suit my personality prior - breakout trades - am now taking them as I found VSA techniques helped me decide if they may be genuine or otherwise. I do not pay much attention to MACD or general indicators as much but when they point to a buy and the market sold down instead, I would be interested as it means many may be trapped.

What you are saying is more a macro approach but there are always exceptions. VIX may be low but there are individual stocks that have high volatility. eg - the volatility spiked when Kellog and Coke were sold down after earnings, I took a countertrend trade at the bottom with good result. Quick 2 or 3 days trade when volatility was high and thereafter, it quietened down.

Fed action may dictate short to med term directions but their track record is at best 50-50... that accounted for their about turn on rates just not too long ago. So react to Fed action but by no means, use it as leading indicator. They react to the economy and if you read the data releases, you can also formulate your own opinion and frame your perspective.... there appears to be an expectation that things are slowing down but if you look at the recent data, the run has been lest bad than feared or there are some signs of pickup in activities.... so that provides some imput to short term trading decisions... coupled with a market which has not shown any serious signs of supply as yet, the path of least resistance appears to be higher for the short term.

 

[DukeCS33]

Focus on your day job and try to increase your income. Dont focus solely on saving/investing. There is only so much you can save/generate returns from investment. But there is always room to increase your income, that is usually low hanging fruits rather than trying to take high risk with your money.

I would be wary about just focusing on one's day job and not look at efficiently working your savings / investments. Given the current disruption across many industries, jobs are getting displaced at a much higher rate. Those who earn more are at higher risk and those who cross 40 are also at a higher risk of getting retrenched. So always have diversified source of income... you never know. Pick up more skills - be it trading or others or a hobby that can be turned into a source of side income. I only worry for my kids as the current education syllabus is not catered towards the future economy where disruption and tech advancement is the norm. I know of many retirees who survive on passive income streams of 10k a month from their investments... be it property or bonds or stocks etc... that is a decent stream that allows one to live in relative comfort and afford some luxuries now and then. And it takes time and a gameplan to reach that stage. Many of them told me that they started planning when they were in their early 30s.

 

[3dfxplayer]

10 - 20% per trade????

Your returns should not be on a "per trade basis". It should be annualised, and it ought to be a % of your total investible assets. You can't claim to have made 100% a year if you only made 100% on 10% of your investible assets (while 90% of your money sits in a bank account yielding 1%).

Shiny is right.

Long term investing with index stocks can already achieve 10% pa.

For individual stocks investing, you should aim 15-20% pa in the long term.

For short term trading, your account must grow 30-40% pa in the long term.

If you can't beat 30-40% pa through trading, you are better off working delivery at foodpanda or grab.

Long term returns of stocks isn't 10%, its around 7%, and most investors will not get anywhere near 7% unless they are 100% in stocks, the typical 70/30 investor makes around 5-6% on his portfolio a year, on average. Thats not bad for essentially doing nothing, but its certainly not as impressive as 10%.

30-40% is pie in the sky, its nearly impossible to grow 40% a year with any consistency, regardless of time spent on the market, I think only Rentech has managed this over the very long run. In my view 20% p.a already makes it a worthwhile endeavour, 500k compounded over 20 years on 6% only gives you 1.6m while the same 500k compounded over 20 years on 20% nets you 19m, thats a 17m gap, very few jobs pay anywhere near 17m in 20 years so its got to be worth it if you have what it takes.

 

[limster]

Focus on your day job and try to increase your income. Dont focus solely on saving/investing. There is only so much you can save/generate returns from investment. But there is always room to increase your income, that is usually low hanging fruits rather than trying to take high risk with your money.

yup, 100% agree with this. Most of your wealth increase when you are young comes from improving your job skills, together with good spending habits.

The data provided in "Millionaire Next Door" corroborates this.

 

[DukeCS33]

yup, 100% agree with this. Most of your wealth increase when you are young comes from improving your job skills, together with good spending habits.

The data provided in "Millionaire Next Door" corroborates this.

Yes by all means improve one's job skills but this and investing can go hand in hand. Unless one falls into the top wages category from the onstart, it is critical to work your savings and try to extract some investment returns.

 

[limster]

Yes by all means improve one's job skills but this and investing can go hand in hand. Unless one falls into the top wages category from the onstart, it is critical to work your savings and try to extract some investment returns.

sure but the reality is that those younger persons not in the top wages category may not have cash to invest for the long term - they have to put most of their money in safe and liquid investments like SSB because they are likely to need the cash to purchase their first property.