How can I earn an average of 20% per year or more on investments?

Question

People have been telling me it's damn near impossible. And yet I see the top performers on http://finance.yahoo.com returning upwards of 50% in a year, or 30% per year over a 4-year period, so I know it's gotta be possible somehow.


Is it?

Answer 1

20% a year is very, very doable. As some of the more successful traders on here will tell you, the key is education, discipline, and money management.

Education to learn the various strategies which do work. Some of my friends trade splits; some trade breakouts; some just buy great stocks and poor stocks. You need to learn a number of strategies to find out which strategy(ies) resonate with you. You’ll hear many people who have not taken the time to learn what a strong stock in a sector is complain that it’s all a crapshoot. Well, it’s not. Sure anything can happen, but you can improve your odds significantly by learning some basic things.

Discipline to follow the strategies and now break your rules. One of the biggest reasons people lose money in the market in addition to not knowing what to do, is lack of discipline. That alone can unravel your portfolio even if you’ve got a foolproof strategy. You must be able to follow your rules.

Money management to ensure that if you hit a bad streak (since it’s all about probabilities and expectancy), that you’ll be alive to trade another day and continue on your quest/mission to earn above average returns.

If you have any questions, please let me know.

Hope that helps!

Answer 2

Well, I've had a couple of times that I was up some 40-odd percent for the year, and a 30-odd percent rise, but I've also had some abysmal years that wiped out some really good gains, and I'm not going to say how bad those numbers were.

Still, I compartmentalize the money. Some I trade, I admit it, its fun--and unlike a visit to Vegas, I still have the stock after putting money down on a stinking choice, so it isn't like a roll of dice or spin of a wheel, even though it sort of seems like it sometimes. Other I put in solid but seemingly undervalued companies. Then I let it sit and grow. It goes up and it goes down, and I leave it pretty well alone (Corning was one exception, I bought when it should have soared, but it fell like a rock, then thinking there was some unreported awful thing ahead, I sold, just before it climbed and climbed and climbed). In one year, I had three companies that tripled, but two that went bust, and it averaged out to 20-something percent. You have to remember that both sides come with the territory, sometimes at the same time. That is why I love exchange traded funds (ETFs) with good diversification, like Ishares and sometimes Powershares products (be sure to look at how much the top ten components are to the whole, some ETFs can get pretty lopsided, even the Dow Industrials has a third of the companies making up over half the value).

Answer 3

Honestly, ... try this.
Visit swisscash.net
I am an investor with them and have a US$50K portfolio there. I'm getting paid every month on time as promised and guaranteed. The average returns are 20% per MONTH!
You can recover your initial investment amount within 8 months and then it's profits on the run from there.
Read the details...it's easy to understand.
It's not an MLM...nothing to 'market'. You can just be an investor and reap ur returns which are guaranteed as stipulated.
You can visit my financial site provided by them at www.swisscash.net/sgamk1632202
There are alot of negative blogs and people tagging it as a scam.
I know what has happened. There were reports that SC investors scammed others...but I wonder why the corrected newspaper reports are not being circulated. It was never a SC involvement but some clowns scamming others by encouraging them to invest with some Swiss Union Bank. Anyway, hell with others. SO far there has been no complaint from a single SC investor that he/she did not get paid as guaranteed.
By the way, I am in touch with some senior consultants of Swisscash and I must say, they are serious dynamic professionals and I'm confident they will be profitable for at least the next few years.
I started with $1K initially and then after my confidence with them, I have now increased to $50,000.
Best regards...Kaz

Answer 4

It is possible but extremely rare for the same person to do that consistently in the stock market (Warren Buffett is among the rare ones so go read about his style and you will see how much research goes into his decisions).

Earning 20% or more per year can be done in other type of investments, private equity for example, owning your own business, real estate among others.

The key to ANY investment being successful is doing as much research as possible to understand what affects the investment and then seeking out leverage if possible (especially in the case of private equity or real estate).

I am sure some people are going to bring up Foreign exchange trading, and yes tons of money can be made there too, but I dont know enough about that to give more detail.

Answer 5

It is possible.

It is also possible you can win the lottery when you buy a ticket, but the odds are against it.

50% in one year can be done, but that is by virtue of luck and not much else. Always remember the basic tenet of investing, risk=return. The more risk you take the better the odds of high returns are, but that is ALWAYS accompanied by increased odds of losses, and very often the odds of losses at high risk levels rise faster than the odds of getting the great returns.

30% in a four year period is not as much as you might think. It simply means that you are 30% better off than you were four years ago. Sounds great, right? Not so fast.
That only means that they made 6.7% per year.

Here is the way it works mathmatically:
You start off with a base of $1.00
1.00*1.067=1.067 (i.e. 6.7% growth in year one)
1.067*1.067=1.14 (same 6.7% return in year two)
1.14*1.067=1.22 (year three)
1.22*1.067=1.3 (year four)
$1.30 is 30% higher than 1.00, so you can now say you made 30% in four years.

Doesn't quite sound as good though, if you break it down that way.

Advanced topic: inflation.
In that same four year period, inflation was a cumulative (at 3% per year) 12.5%, so that 1.3 doesn't buy as much now as it did then.
If you factor out inflation, the actual, real return in 2003 dollars was 15% over that period of time. This means that the real return was about 3.7%

This is actually a modest return. One can easily do better over the LONG run.

p.s. Politicians LOVE this trick. "I grew the economy by 20% in my first 4 years in office", but when you look at it with some knowledge of the time value of money, it never really is as great as they say it is.

p.p.s Foreign Exchange trading does offer greater returns, but also (surprise!) offers extra risk in the form of currency swings (exchange rate risk). Example: You get 100 units of currency as a return on whatever. This year, the exchange rate is 1 to 1 against the dollar, so that 100 units is $100 dollars. If the dollar rises in value 5%, that 100 units is now only worth 95 dollars, and even though nothing has changed with the underlying investment, you have suffered a loss.

Answer 6

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Answer 7

If you have tons of money, open an account with SAC Captial. Steve Cohen seems to get 30%+ returns every year.

Answer 8

You'd have to be a pretty active trader, and be willing to take significant risks. Most mutual funds won't yield that high.