Hey Y'all

[Lafayette]

Hey guys, I'm a 23 year old engineer in NYC. I also make quantitative trading strategies. I believe you can make way more than 4% a year and account for all possible scenarios if you do enough research, and that index funds arent the best way to invest. My life goal is to save up 200k and live off of automated trading in a third world country. Nice to meet you guys.

[prognastat]

Welcome to the forums.

I don't think most here would be happy with a 4% return on their investments. Those expecting a 4% SWR from index funds aren't expecting 4% average annual returns. Their expectations are probably closer to 9% inflation adjusted returns.

[Lafayette]

I see.

[Bankai]

Welcome, Lafayette! What return do you target?

@prognastat - I don't know, I always thought this is an extremely conservative bunch. How else can you call accumulating past 3% or even 2% WR?

[prognastat]

Definitely conservative, but I think most of us do believe that 3/3.5% is pretty much to cover for even the worst 30 year period in the history of the stock market. I don't think most are expecting that to be the average return, but rather being very conservative in their risk.

[Bankai]

Yeah, but is this not due to weighting 'risk of having to somehow make more money in future' much more than 'risk of definitely spending 'now' extra x years (one will never get back) working to accumulate more than one needs'?

I'm not saying it's the wrong way to look at this. But, say, 2 years of work 'now' for extra cushion in order to avoid 'unlikely' possibility of having to work for 2 years at some point in future is looking at risk one-dimensionally imo.

[prognastat]

Well it all comes down to the amount of risk one is comfortable with taking.

What I was trying to say is that most here and the rest of the FIRE communities don't believe 4% is the likely return they expect on their investments and if Lafayette believes this is the expected return on stocks/index funds he might want to read a bit more on FIRE and investing. Just that 4% SWR is what they expect to get them through all but the worst periods in the market.

There's a difference between what people expect the returns to likely be and what they prepare for as a worst case scenario depending on the level of risk they are comfortable with.

[jacob]

Apples and oranges ... an active trading strategy(*) is entirely different than a passive (or even active) investment strategy. The 4% rule certainly doesn't apply. Depending on frequency, the OP could easily change positions more time in a week or even a day than the average index noob does in a lifetime, literally.

(*) These tend to follow another rule: 10% are really good at it and 90% fail.

[Bankai]

(*) These tend to follow another rule: 10% are really good at it and 90% fail.

What if breaking into the top 10% here is as easy as in any other general category, like for example:

1) fitness (70% is obese/overweight so you're only really competing with 2 normal weight but sedentary guys, possibly smoking and on SAD diet.)

2) net worth for your age group (50% doesn't have $400 emergency fund, barely anyone has anything outside pensions/house)

[Jean]

I've been asking myself the same question, but I always assumed that those 90% all tought they were in the group that would have it easy breaking into the 10%.

[jacob]

@Bankai - It's not. It's more akin to entrepreneurship in how many businesses actually succeed well enough to provide an income that's comparable to a salary. For people who try to make a living trading full time and spend 1-2 years developing about 10% will succeed and 90% will fail/give up.

[Bankai]

The failure rate of businesses includes, among others:

* tax shelters abandoned after they served their purpose
* people losing interest and getting a job
* people who were running a few small businesses at the same time but then decided to focus on the most promising one
* under-capitalised businesses with cash insufficient to last until a critical mass of customers is reached

Factually these are indeed all failures. However, does including them in statistics really make sense?

On another note, I wonder what the success rate for INTJs is. This personality type might be well suited for mental and emotional challenges of the markets.

[jacob]

It certainly makes sense to include these failures. People abandon trading for the same reasons.

[7Wannabe5]

I read somewhere that becoming a real estate agent has a higher failure rate than active trading.

[Lafayette]

Welcome, Lafayette! What return do you target?

@prognastat - I don't know, I always thought this is an extremely conservative bunch. How else can you call accumulating past 3% or even 2% WR?

20-30% is achievable for an active trader.
Since I spend most of my time building algorithms and strategies, I guess I glossed over the index fund part of the FIRE movement.
Trading with no strategy, just based on your gut has a high failure rate, depending on your discipline, level of due diligence, and intuition.
The point of algorithmic trading is to remove the subjective factor and generally have a researched, consistent strategy that can handle different market conditions. Currently I trade on the daily time frame so I trade every few days. Of there are many people that never do any strategy research and trade things with high volatility and bad fundamentals like penny stocks or ICOS or 3x leveraged gold mining ETFS but seem to have strong intuition and pattern recognition skills.

https://quantocracy.com/

https://www.youtube.com/watch?v=SalZFMDUMzA