The goal is $1M by the time I'm 40.
Using the Compound Interest calculator at http://www.fido.gov.au/fido/fido.nsf...tment?OpenPage I've determined the following plan.
Initial Investment: $25,000
Regular Investment: $300 / week
Rate of Return per year: 20%
This will take 12 years and 28 weeks. That's a bit over me being 40, but OK for me. I assume I can increase my regular savings by more than CPI.
So I'm trading a trend following system developed by a professional that has an average annual rate of return of over 20%. I realise that some years will be negative and other years will be greatly positive.
Currently I use a simple excel spreadsheet to determine my position sizing. Position Size = Equity Balance / Number of Positions
Position Size = The dollar amount to open the next position
Equity Balance = Available Cash + Current Value of Assets
Number of Positions = Number of positions I divide my initial capital into (in this case, 25)
So as my equity grows (and sometimes shrinks) my next position size also grows (and shrinks).
So my question is; How do I accurately position size when I am adding to my Equity by regularly saving and adding $x a week to my Available Cash balance.
Do I simply manually add $300/week to my Available cash on my spreadsheet? Then when a new entry signal is given I look at my position size formula and enter into the new position using the calculated position sizing?
Is there an issue if there is significant time between entry signals? e.g. position 1 is $1,000 of ABC shares. Position 2 say 15 weeks latter would be $1,180.00. (15 weeks x $300 / 25 positions = $180).
Assuming the market has be stagnant then the the value of the second entry is, 18% more than the value of position one.
Is this an issue?
I'm guessing not; as it will all even out in the wash over 12 years.
Any other thoughts, comments?