100% in a year or even in the quarter is a percentage that is constantly buzzing around social media. But is this sustainable and realistic? We firmly believe that 100% in 3 years is realistic in the long term. Learn why in this article.
Unrealistic expectations and naive miscalculation
Many, if not all beginners, and even advanced traders and investors, make the mistake of forecasting only ‘good’ months. But, in the end, these are daydreams. You’ve probably read many times that “2% a day” or “10% a week” are tangible and realistic goals. That is simply false. In the long run, these returns are difficult to implement.
Assuming that 2% per day is accomplished, that translates into approximately 14,000% per year. In other words, you would increase your money a hundred and forty times. $7,000 would make $1 million in one year.
Why is 100% realistic in 3 years?
First, let’s reduce the 100% to a single year. The third root of 100% is 26%. So to double your money in 3 years, you have to make a return of 26% a year. The reason is the compound interest effect.
Now let’s calculate the average monthly return. For this, we take the twelfth root of 26%. The result is 2%. In order to achieve a return of 26% per year, you need 2% per month.
Is 2% per month not too little?
We do not think that 2% per month is too little. Please keep in mind that we are talking about a monthly return on a long-term average. You will also have months where you lose money. These months must be offset by above-average months. If you average 2% a month, you’re a good trader! Of course, long-term and average monthly returns of 3%, 4% or even 5% are possible. But this just makes it clear that 100% in 3 years is more than realistic.
15% a year
How does the promise of a 15% return a year sound to you? Many people would love to take this return. Curiously, these are often the same people who find the idea of a monthly return of 1% ridiculous. But 1% per month leads to about 15% per year. An understanding of the compound interest effect and consistency are fundamental to having realistic expectations regarding the return.
It is immensely important to classify returns realistically and not to lose sight of the long-term goal. Do not believe “barkers” who promise you 20% a month with little effort. Trading and investing means work, but it pays off, especially in the long term.
How do I achieve 26% a year?
Admittedly, 26% a year is not child’s play, but it is reachable with a bit of diligence and ambition. There are numerous strategies that achieve such a long-term return, and it certainly isn’t necessary to sit in front of the computer for hours a day to implement them. In fact, just 5 minutes daily will often suffice for some of these income strategies. These include Butterfly strategies on indices, which are set up with options continuously every month.
Where can I learn more about income strategies?
These income strategies are an integral part of our soon-to-be-launched Options Nanodiploma. You can also look at our signal community when we set up, manage and close those trades.