ADV: Becoming a Millionaire: Track Your Capital & Plan Accordingly
Filed Under (Passing Thoughts) by Casey on 31-08-2010
It is commonly stated that most millionaires are made through real estate, business start-ups, and financial markets. Each year thousands of people around the world embark upon the adventure of becoming traders. The reality is that those who learn to trade and approach it as a serious business do make lots of money. Unfortunately, they are the minority However, if you have a realistic plan surrounding your trading—strong risk management and a solid trading strategy—then you will drastically increase your chances of success. It is cliché, but also very true—trading is not a sprint, it is a marathon. Be in it for the long haul. If your mindset from the beginning is to create lasting wealth over a long period of time, your chances of success will be much higher than if you plan to turn $10k into $1 million in a year.
The My First Million Calculator can help you put a realistic, workable plan together for how to grow your capital over time. All you need to know is the following:
- Current investment capital
- Expected Rate of Return
- Your Age
- Expected Inflation Rate
With this information, you can determine how much wealth you will be able to create over X number of years. Of course, the variable is the expected rate of return. How well can you do each year? To put it into perspective, most professional FX traders are aiming to produce returns around 20% per year. If they perform beyond that, they are literally at the top levels of industry performance. The truth is that, as a small retail trader, you can do much better than large fund managers due to several reasons, but nonetheless, this should put things in perspective a bit. Do not expect to increase your account by 1000% each year! Internet marketers and scam artists would want you to think otherwise, but the truth is sustaining those kinds of returns year in and year out is not a realistic plan. Instead, be realistic in your planning. How well can you do each year? Take a quick second to plug your variables into the MFM Calculator:
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The other variable not included in this list is you ability to add savings to the your investment capital each year. This will significantly decrease the amount of time it takes to hit your goal. For example, if your current investment capital is $10,000, and you can add an additional $2,000 each year, then your goals are going to be hit much faster than if you start out with the initial $10,000 but do not add anything to it each year. Consistent savings is a huge key to building lasting wealth in the forex market.
Inflation has averaged around 3% since the 1920’s and it is not expected to vary significantly. However, the current economic outlook in the United States is extremely uncertain; furthermore, many experts are concerned about the possibility of both inflation and deflation in the coming years in the United States, and any lasting presence of either threat would cause severe problems in the United States. Therefore, it is good to be aware of these possibilities as you put your long-term plan together and hedge against these risks via investments in hard metals, real estate, or other tangible assets.
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