Re: [CANSLIM] Reasonable Goal?

From: Ian <ianstm@shaw.ca>
Subject: Re: [CANSLIM] Reasonable Goal?
Date: Sat, 24 May 2003 11:11:29 -0700
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Hi Tomas:

I'll be the exception here and say that I believe that 40% a year is a
reasonable goal (particularly up until you have about $600,000 - IMHO,
outsized returns are a lot easier with smaller amounts of money) if you are
extremely disciplined about:
* cutting losses very early
* REALLY letting your winners run
* committed to buying strong breakouts during confirmed rallies (You don't
have to believe in a 'secular bull' to do this - but you do need to
understand that most of these rallies are good for about 2 months and 30%
runs in the indices).

NONE of these 3 things are remotely easy. They all seem to fly in the face
of basic human nature. But they are all absolutely essential to achieve
outsized gains.


My personal goals are to double every two years (about 42% per year), and I
have been achieving it. As an example, my virtual fund was started 2 years
ago this weekend, and is up about 118% to date:
http://www.marketocracy.com/cgi-bin/WebObjects/Portfolio.woa/wa/FundPublicPa
ge?source=DoPiAlBbDlAmIgAmMaKiAbBi (and this was during an ugly market, and
with an average of 30% cash, and no shorting allowed, and using strict SEC
mutual fund asset allocation rules)

As a Canadian, the hardest part about trying to compound the gains is
taxes - I'm not sure how difficult that is in the US.

Consider all the strong post-March 12 breakouts that are up 80-200%. If you
slowly went to fully invested as these breakouts happened, you would easily
be up 40% in the last 2 1/2 months.

IMHO, with an unintentional focus on microcaps and nanocaps, I think that
somewhere in the neighbourhood of $2,000,000 - $4,000,000 is where these
kind of gains become more difficult. Therefore, for the professional money
manager, who must look after 10's of millions just to earn a living from
fees, it really is unreasonable to expect 40%+ annual gains. But for the
individual investor with a much smaller amount of $$$, I believe their
'money making universe' is an order of magnitude larger in terms of
available equities, so they have a reasonable chance at these kind of gains.

Consider SSYS and HITK, which have been 2 of the best stocks during the last
2 months. Both of them were trading under 100,000 shares a day when the
rally started (SSYS had a 13,000 share day in early march, with the average
probably under 50,000). As a professional manager with $100,000,000, you
probably couldn't or wouldn't buy enough of either of these to make a huge
impact on you fund. But as an individual, if you buy 6-10 positions for
yourself, these two stocks alone could have netted you 20-30%.


Cheers,

Ian


Marketocracy has 100+ funds that were up 30% in the last 30 days alone:
http://www.marketocracy.com/cgi-bin/WebObjects/Portfolio.woa/wa/RankingViewP
age?date=20030516&subject=30Days%20Rankings%2081%20%2D%20100
IMHO, that is only possible because of the small position sizes.








- ----- Original Message -----
From: Tomas <tomas986@yahoo.com>
To: canslim canslim <canslim@lists.xmission.com>
Sent: Friday, May 23, 2003 12:57 PM
Subject: [CANSLIM] Reasonable Goal?


> This question is for the senior CS'ers.  If an
> investor is 29 years old right now, and his goal is to
> make $2M by 40 to retire, is this a reasonable goal?
> The assumption is that he will start with $10K and add
> between $5-$10K capital every year.
>
> I understand that there are many factors like
> - how discipline you are
> - how diligence you are
> - how persistent you are
> - how you learn from your mistake and
>   do post analysis of your trades
> - and even how lucky you are.
>
> But assumption that the investor is decently good on
> those factors.  What is your opinion?
>
> Thanks,
> tomas
>
>
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