What Is The Best Rate Of Return For Investments?

One of the top items considered very carefully by investors when looking at investment packages is the rate of return. It is not surprising that the first question they ask for when presented with an investment proposal is the rate of return. The rate of return is evaluated with reference to a certain period of time.

There is a question that all investors ask inevitably: how much can be considered appropriate rate of return? How much is the best or ideal rate of return by which we could measure investments by? When the bank tells you to save your money in a time deposit account because it pays 5% rate of return compounded annually, how can you tell that you are making a good investment with a good rate of return?

We need to take into account three important factors to answer that question properly: inflation, taxation and the highest rate of return for what is considered as the \”safest investment\”.

To start with, what is inflation? Wikipedia calls it \”a rise in the general level of prices of goods and services in an economy over a period of time\”. Inflation erodes the value of money. Your P1,000 now may not be worth much 20 years from now because of the constantly rising prices of good and services. Three years from now and you probably may not be able to buy what you can buy with your P1,000 today.

The second item in consideration is taxation. It needs no discussion as everybody knows taxes. Tax rates vary as it all depends on who is in power.

The third consideration is the highest rate of return for what is believed as the \”safest investment\” which is, of course, government bonds. These are considered very safe by the very fact that they are fully backed by the government. Since it is unlikely for a government to go bankrupt except when it is in political turmoil, it is inconceivable that it would renege on its obligation.

Together, these three factors will come into play when computing for the ideal rate of return.

In the book \”Buffetology\”, Mary Buffett and David Clark explain the interplay between these three factors. They quoted Warren Buffett, one of the world\’s richest persons and greatest stock market investor as saying that the minimum rate of return of investment should not fall below 15%. The author wrote in Chapter 25 that just to even up with inflation and taxation, a 7.2% return on investment is needed. The book concludes, \”to have a real increase in your wealth, it is necessary that the return on your wealth be at least equal to the effects of taxation and inflation\”.

Focusing on the effect of inflation and taxation on the rate of return, the author cautioned that investing in bonds with an annual compounding rate of return of 8% would probably leave a rate of return of only 0.5% (8% less 31% income tax, less 5% inflation). Or worse, zero rate of return if the inflation rate rise to 9%. In conclusion, it does not make sense then to invest in government bonds or in any investment if the rate of return offered is below 8%.

Less Adjustments with Option Strategies

When the volatility is going down and the stock markets are moving in an upward trend, you could say that this is the right time to use the condor strategy. The Condor is a negative Vega option spread, meaning that you can make more money by using the Condor when the volatility is moving downward.

With little effort and/or changes at all, most of us Condor traders have been making money over the last few months. With this kind of income spread, at times, it can really be great! There are those times that we have very few adjustments to make. If the underlying simply trends and stays within a tight price range, then the Condor works well and you can make money in this market almost each day.

I would like to relax, enjoy your life, and make money nearly each and every day, wouldn\’t you? With the Condor it can be done! It\’s really is a beautiful way to live when the market gives you this kind of opportunity.

I have had the chance to learn a much better, quite different, very cautious way to trade the Iron Condors. I have learned this safer method by studying with San Jose Options. While most option teachers teach you a more aggressive way to trading the Iron Condor, I can sleep longer in the mornings, knowing that my options portfolio is not being exposed to high risk and knowing that I am not losing a lot. While other people, not knowing this trade, have to get up at the opening of the stock market each day in case they have to make any changes to save their money.

I have been making an easy 10% on this new way of conservative trading for the last few months, and believe me; I haven\’t had to make many changes at all. I can put the trade on and let the trade and my money work for me. The way I was trading this option strategy before, I was making several adjustments, but with this new trading technique, the market never hits my adjustment points, not one single time. Let me tell you, I am really enjoying trading with the stock market now.

Study more in Options Classes that can change your life. Stop by the Options Traders Cafe and find out what trading options is all about.

Tweet This Post

Hints For Beginners: ETF Trend Trading

There are many programs and services available on the Internet that offer services when a person wants to participate in ETF Trend Trading. When choosing a service or program an individual will want to take some time to consider what their needs are and how the service or program can help in making successful trades.

When doing an accurate technical analysis a person will need an analytical tool. There are many available that will give the detailed information that will help to identify trends and patterns in a sector. The programs usually are broken into short term, intermediate, and long term trends within a sector. Some of the programs offer other charts and graphs that provide information on the trends that are occurring within trends.

Using these tools without doing the necessary historical data collection on a sector can make analyzing trends less effective. A person will want to use a combination of technical analysis and historical data to identify any obvious indications of why a trend may have been a anomaly in the overall picture of that sector’s trend history.

However, this trend may not be repeated again in the sector for several years. A person making a future trade based on the indicators of the analytical data alone would not know this and the trade made would not be as successful as might be expected.

The basic premise of ETF trend trading is to get in when stock is taking on in a direction, either up or down, and stay on the ride until it reverses. By taking a long position when it is rising and a short position when it is losing, a person can move when the trend reverses, or when they think it is going to reverse.

When an individual is going to begin doing the necessary analytical work to make effective trades they will want to take a holistic approach. Including historical data, current market climates in that sector, and any anticipated significant changes to that sector will all act to make trades more successful.

When first beginning, it is a good idea to set buy and sell limits so that an opportunity does not slip past. When trend lines indicate a reverse in a trend, a person needs to act on that indicator if they feel that the trend is getting ready to reverse.

When learning about ETF trend trading a person will want to visit different websites and forums that can provide the information that is needed to develop the skills necessary to make this type of trading most effective. An individual should always do the necessary research on a sector before trading. Many people find it helpful to follow a sector to see how actions by companies within the sector affect their trends.

Learn how it’s very possible to make 6% per month in your investment accounts using etf trend trading! “Big A” is a recognized expert in the world of etf trend trading system and reveals trading and investment secrets that have been kept under wraps by hedge traders for years. Give him your email and get a free report and webinar today!