When a fund manager invests their clients’ money, a few important think goes through their mind.
- How to protect clients’ money.
- How to get the best ROI for clients using safest investment methods.
- How to ensure the continuation of the funds’ success.
Warren Buffett, from 1965-2005, has produced an annual average return of 21.5%, which is double the return of the S&P 500 – including dividends – over the same period of time. George Soros – the man that broke the Bank of England – generated an annual return of 30% through his Quantum Fund from 1970-2000, nearly three times the average return of the S&P 500.
So what do all these people have in common? They know how to manage risk well. I bet many of you have watched tons of videos or attend seminars which touted the possibility of returning 300% or 1000% each year. Well I do not discount the possibility that once in a while one does see those kinds of returns but to do it consistently, I seriously have my reservations.
Anyone can claim that I grew my account 1000% by trading a USD10 and growing it to USD110. I know it is possible as I have seen traders do it before. However I serious doubt one can repeat the same feat with a USD1,000,000 account and grow it 1000% in the same time frame as the smaller account. The bigger the account, the tougher it is to return such returns. So I know for a fact, making thousands of USD a year won’t make us rich.
This is what marketers tell traders why they should learn trading from them:
What they fail to tell you is that
How Fund Managers Grow their accounts
So what is the best amount to invest?
To answer this, you have to make a study on your trading accuracy and what you need to survive and continue trade your way to success. I am assuming you are a discipline trader and your money management is impeccable.
1. Check what is your accuracy? – Professional traders have an accuracy of 7:3 win loss ratio. Your accuracy will determined the type of risk you should take per trade.
2. How much Return on Investment you make annually? – Let’s say 5% a month. That is roughly 80% ROI annually compounded. By knowing this, you can start to fund your account the amount which can return enough for your expenses plus saving per year.
3. 20% of your trading capital to be allocated for directional trades which is high risk with high return and 80% allocated for non-directional which is low in risk and return.
Patience! You need tons of patience to wait for your setup to kick in. The free time is used for improving your trading knowledge.
Hope this sharing helps.