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Most who want to get rich or retire wealthy... have got it wrong

Discussion in 'Beginner's Lounge' started by tech/a, Feb 5, 2015.

  1. tech/a

    tech/a No Ordinary Duck

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    (1) I've seen post after post from younger people who are overcapitalized and under educated who are searching for ways to increase their net wealth.
    They all want to invest their merge funds and compound their wealth.
    In a large majority of cases that effort to increase their $5-10K by $1000 in a year just doesn't cut it.

    (2) Then there are those who are close to retirement or retired with a nest egg that they want to generate income from dividends and with a bit of luck out perform the market so they can keep ahead of inflation.
    They cant stand the thought of their nest egg being eroded so invest "Safely"
    Again very few actually achieve better than the market. Let alone improve their position in retirement.

    I think both parties have it wrong.

    My view is that they "should" be aiming for a way to use the financial markets to generate a financial return from a very low capital base week in week out.

    I know of 2 here (probably more) doing this right now returning every week at least and often way more than a decent wage.
    From Under $20,000 capital base.


    If your young and could increase your income by 20-150% a week in a few hrs a day---would you?
    If your retired and could supplement your income 20-150% each and every week---would you?

    My point is people should learn how to fish rather than giving their boat to someone else to go fishing for them!
    Or putting their boat at risk.

    Fish in Big ponds with Lots of fish.
    Taking lots of small fish and the odd bigger one.
    Safely without putting their life savings at risk
    Be it the young guy or the long time saving retiree.
    Both have similar agenda's

    What would $300-$2500 a week do to your life style?
    I would argue that to the majority of average people
    Quite a lot.
     
  2. craft

    craft

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    I disagree.

    Compounding is what creates true (intergenerational size) wealth.
     
  3. tech/a

    tech/a No Ordinary Duck

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    I don't disagree
    But I doubt many get there.
    Particularly in ranging or bearish markets.
    growth is something you don't hear a lot about.

    You don't hear of 1000s of people compounding since their first pay packet.
    personally I knew that I could only hope to increase wealth by earning more than I spent.

    Has served well for 60 years.
     
  4. Nortorious

    Nortorious

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    I'm with t/a on this.

    I'm 28, earn $85k plus bonuses (on track for around $32k this year) and am using the stockmarket to leverage my capital for the future.

    I spent from 17 to 27 in constant learning and real trading of the market and have only cracked the code recently to generate decent returns. Yes I lost money during the learning years, but I only volunteered around $17k to the market through this. My uni degree was $30k+ and isn't as valuable as knowing how the market moves.

    My ideology is to generate a second and third stream of income through investing:
    Income #1 = My salary and bonuses
    Income #2 = Capital gains
    Income #3 = Dividends

    Capital gains and dividends are putting my cash to work rather than it sitting in a term deposit or in a savings account where I get taxed again on after tax savings. In saying that, any cash I have as an emergency fund is sitting in an offset account.

    I see t/a's points as my ticket to wealth and financial freedom.
     
  5. craft

    craft

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    So worked for 40 years?

    Buy and hold over those 40 years has been about 11.5%

    Assume average earnings and investing 10% of income.

    You would today have $5 Million dollars – that’s a passive income of $275,000 at today’s dividend yield.

    Now you are talking 130K (top of your range) return on 20K – a return of 650% so increasing the compounding rate by 2.5% seems pretty modest yet it would double the 5M to 10M, or 5% outperformance would give you 20M.

    Achieving a 5% compound outperformance seems a little bit simpler to me then a 650% trading return that produces nothing when you stop. But I’m sorta lazy – If I was real lazy I would just settle for the 5M index return and get on with other things in life.
     
  6. tech/a

    tech/a No Ordinary Duck

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    Craft

    Yes iknow all the theory.
    I don't know of anyone or even heard of anyone
    Who has actually done this or is 10/20/30 years into it.

    But I do know plenty of people who work 2 jobs some 3
    Who work massive overtime.

    I'm suggesting the financial markets are perfect for the well trained
    To make a fantastic increase in weekly income in some cases spectacular
    Week in week out. For an hr or so a day--- even less.

    They could then put the excess earnings into a compounding investment strategy
    If they wished they could do both.

    The younger people want something tangible and NOW.
    Nothing more motivating than $600 in an hr on a Monday night!
    Or
    10% in a year on your $10,000 that's a grand a year
    $1100 next year.

    I know which one most would stick at
    Just ask PAV
     
    aussiestinger likes this.
  7. Wysiwyg

    Wysiwyg Everyone wants money

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    Oh I'm in now. Buy and hold what 40 years ago?
     
  8. tech/a

    tech/a No Ordinary Duck

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    Good point
    Vast difference to
    Theory and Practice
     
  9. craft

    craft

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    I have no issue with making/ supplementing an income from trading. But your thread title is
    I don't reckon what your saying will make somebody wealthy (are your examples 'rich/wealthy' from the market?) - compounding will.
     
  10. McLovin

    McLovin

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    +1

    An interesting discussion though. And how scaleable is something that can consistently pull in 650%/year.
     
  11. tech/a

    tech/a No Ordinary Duck

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    Wouldn't be so sure.
    For a young person it will open up many doors closed to them due to under capitalization---that includes compounding

    You have to have something to compound.

    Imagine if your 30 earn $60K a year and learn how to make another $60K over the next year.
    What could you do.
    Money Does Make money.

    If your retired that little bit extra can make life easier
    and protect your nest egg.
    Even add to it

    I'm not suggesting massive amounts even E mini could see a few Hundred a week for
    a well trained practitioner.

    What I'm actually saying is

    YOU DON'T HAVE TO BE WEALTHY OR RICH
    You know how to fish so you can generate income

    You can be
    UN employed
    Sacked
    Injured some--handicapped
    Redundant---try that at 55
    Retired
    The list goes on.


    You don't need Wealth to generate it.
     
  12. craft

    craft

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    Argo, and Milton are two funds that jump to mind that give you broad market exposure and have been around for more than 40 years.

    I also suspect you are taking a very literal interpretation of buy and hold – the dividend stream and savings stream is progressively invested, and corporate takeover action occurs – even if you otherwise sell nothing.


    In practice it works just fine too.
     
  13. futurenow

    futurenow

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    As an 8-6 cube farmer I don't have the time to watch live feeds.

    What you're suggesting is a full time job for some.

    Unless I'm missing your strategy, I'm not sure how a full time schmo can take advantage of market volatility and still be a productive employee.
     
  14. Wysiwyg

    Wysiwyg Everyone wants money

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    That is okay, I believe you. Having foresight and a degree of fortune now or 40 years ago could create the wealth you believe is possible.
     
  15. craft

    craft

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    I don’t really disagree with anything here (except the thread title).

    But if you have a million bucks and leave most of it too rust while your work 20K hard – I think that’s dumb – you need to manage it all for the best overall dollar return.

    The other thing that would be dumb is if you devoted all your time to trading and never built yourself a compounding machine for the surplus income – especially as the skill sets are pretty transferable for the two approaches, if people can get past their biases.

    I've said my piece about compounding -I will wish you well and leave you to your objective with this thread.

    Ps – I started out trading.
     
  16. burglar

    burglar

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    Speaking for myself,
    it doesn't have to take long.

    I just have so much time to pass.
     
  17. Wysiwyg

    Wysiwyg Everyone wants money

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    The alternate outcome is getting it wrong due to circumstances. Tech/a sought of leans toward present time versus faith or long time. One is measurable every moment while the other waits for a future outcome.
     
  18. futurenow

    futurenow

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    So you don't go to meetings, manage staff, attend conferences or report to management?

    The wins (and losses) of daily fluctuations are instant.

    A long conversation, toilet break or lunch (which is a daily event at work) jeopardises any reaction to the market.

    Suggesting an hour of research on a Monday night can earn you $600 seems nice, but unrealistic when you're locked in daily meetings with the PHB*

    *Dilbert reference
     
  19. Ves

    Ves Beyond Good and Evil

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    I'm 29. Wife is a bit older. I work one job, Earn about $60k. Wife works part time. Maybe $20k ($30k on a very good year).

    We own our house. Mortgage basically paid off. I keep a small balance to keep the loan rolling in case I need it.

    Also have a six figure sum in the share market. It's growing. I'm adding to it as much as I can.

    If I keep saving at this rate we will be the couple that you don't believe exists.

    Edit: Before you ask I saved every cent I have from my own salary. No inheritences. Last time someone intimated that what I do is from someone else's work or it's just a hobby I got offended.
     
  20. shouldaindex

    shouldaindex

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    tech/a - So if you make 20% a week, and you started off with 10k last february.

    You'd have over 50m today.

    Really?
     
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