I'm an investor... again

[yesthattom]

A few weeks ago I impulse-purchased The Little Book That Beats The Market, mostly because the foreword is by someone I trust. I read it, and it was basically my investment strategy, but he worked out a trick that makes the difficult math disappear.

According to his simulations, you can turn $15k into a million in 17 years. That’s when I retire. So I hope to invest $30k.

Wish me luck!

Comments

[xthread.livejournal.com]

That... would be a neat trick. You need to get six doublings to accomplish that, which means a prolonged rate of return of more than 24%.

That is not a small number.

[yesthattom.livejournal.com]

Have you read the book?

[xthread.livejournal.com]

No, I haven't.
Is that relevant?

Oh, also, it occurs to me that I misspoke - to accomplish the financial goal you propose, with a one-time $15k investment, would require an after tax return of more than 24% annually, sustained for 17 years in a row. So, annual returns of 30%, assuming no significant transaction costs. Which is still a really big number. That's not just beating the market, that's beating the market by a lot, all the time.

(A point of clarification: I am a strong advocate of individual equity ownership; in my experience, there is a high correlation between avoiding the stock market and maintaining a slowly falling level of purchasing power and relative wealth. However, expecting to be done because you buy in once is extremely optimistic, given how short your time horizon is)

[yesthattom.livejournal.com]

Yes, it's relevant to me.

The estimates are that the system loses money 1 year our of 4, but makes it up in the longer term. It's basically a fast way to find mispriced stocks, and the prose is just a joy to read.

[xthread.livejournal.com]

The estimates are that the system loses money 1 year our of 4

IE, about as frequently as the market as a whole does...

but makes it up in the longer term

Right - do you see why getting returns above 30% on an ongoing basis is a challenge?
Remember, if I have a dollar, and I buy something with it that has variable value, and that value falls by 10%, I need for it to then gain 11% to recover it's original value. If it falls by 20%, I need for it to go back up by 25% just to get back where I started.

Again, my complaint is not with owning stocks, nor is it with Value Investing as a basic strategy. My complaint is that 'I can put $30k in now and get a megabuck back really soon' is broken.