What return do you aim for?

[Sauce]

AA - yes that's true, but its only your long term average compound return that matters - not returns from individual trades. The point is that if you don't beat a certain hurdle, you shouldn't be in the game. And CJ quite rightly points out that market returns, index returns, are the most rational benchmark.

So while it's not a yearly 'target' it is critical to have a long term benchmark - because if you don't beat the market you are destroying wealth not creating it (once opportunity cost is factored).

Regards,

Sauce

[Sauce]

but yes I get your point, I think one should aim to achieve returns better than they could achieve by investing their money elsewhere when weighing up the risks in given investments.

Yes well said

And regarding your previous post; it's not about having an annual target in absolute terms, its about having a long term benchmark. In other words, you need to make sure your not the patsy.

Cheers

Sauce

[Sauce]

Another random point for ENP; I wouldn't listen to anyone on this site who claims they can make annualised returns of 20%pa, on average, consistently. There only a small number of people in the world who have skills like that and they certainly wouldn't bother posting on sharetrader.

To give you an idea why this is a rediculous claim, consider this:

500k compounded over 40 years at 20% becomes $734,885,784

As nice as it would be, that's just not a likely scenario for any of us.

Regards,

Sauce

[Sauce]

True, I just think the learning curve is steep for most new players to the share market and Id hate to think that they just give up after a few years of trying if they failed to bet a certain benchmark, this is where I feel this approach could be potentially damaging to the potential wealth of individuals.

Exactly half of ALL investors will not beat the market over their lifetimes. And a much higher percentage of retail investors will not beat the market over their lifetimes because they don't have an edge on professionals.

The truth is it is a smarter move to buy the index for most people. Its just not nearly as fun.

Cheers

Sauce

[CJ]

The truth is it is a smarter move to buy the index for most people. Its just not nearly as fun.

I am working my way through "the Intelligent Investor" at the moment so that may have influenced my answer. But you cant argue with the fact that if you cant beat the market, you should just join it (with an index). It just isn't the kiwi way though - the WINZ fund has closed down due to lack of funds. I wonder if they offered it to NZX/Smartshares to take over or if they will create a new one in its place. Or does anyone with serious oney who wants an index fund just buy an iShare or similar on the ASX or US exchanges?

AA - You should risk adjust your returns if comparing to the NZX50. If you are using CFD's etc, you would want a much higher return to justify the extra risk you are taking on.

I have a long term portfolio of predominately NZX50 shares so it is my natural benchmark - Ideally I would be holding the ones that make it go up and not the ones that make it go down, therefore beating the index significantly.

The one area that I am looking to improve is to start taking profits, or stopping losses where a share max's out or the market looks to take a dive, hence my comment that I also want to beat the term deposit rate. As they say a rising tide raises all boats, its when markets aren't doing that well that you have the opportunity to make more than most (even if that is just being out of the market).

Sauce - agree with your comments re a 20%+ return. If the market goes up 40% in a year, 20% doesn't look good at all but if the market goes down 15%, you would have to take a lot of risk to earn 20%. It may be a fine goal over a long period of time (say 10 years) but comparing to a (risk adjusted) index is a far more timely indicator of how you are doing.