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Comment by osrec | Hacker News Reader

I've done ok trading stocks and FX, probably enough to live off. There is a caveat however; you need to have a sizeable portfolio to begin with. Otherwise, the risks you'll need to take are simply too large.

If you think you're going to turn £5k into £500k in a year, forget it! But turning £5k into £5.3k is certainly doable.

Scale that initial portfolio to £5m, and you can take home £300k with relative ease in a good market- that's a very comfortable income for most people.

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But that's like 6% interest rate. The S&P 500's average anual return is 10%... So unless I've got something wrong, you'd be earning far more if you just let your 5m chill there and go watch Netflix for the whole year.

The S&P 500's expected annual return is 10% except when it isn't.

S&P (and the rest of the market, really) can depreciate over a year and you'd just be losing your money.

5k into 5.3k is 6%. You can get much more than that in the long run by just putting it in an index fund.

Why bother day trading?

Property is not a great option in the UK currently due to rather high stamp duty (i.e. property tax, payable by the buyer) - if stamp duty were lower, I would probably put my money in more property. Equities were a reasonable second choice - my portfolio is fairly diversified now, so I am not making trades on a daily basis but I do keep an eye on it all the time. I probably re-balance my holding about once a week.

Index funds can take quite a hit in a bad market. I am very careful to avoid big slumps in my portfolio value, even if it means not being invested for a month or two.

Why equity though? Could you please elaborate why you don't like bonds.

Because for me stocks look like a hot potato game. Literally the whole reasoning behind price is you can sell it higher to someone later.

The price is not supported by anything (book value is 10 to 100 times lower) and you don't get anything because liabilities come first on overvalued assets.

But could you have turned £5m into £5.3m with purely passive investment? That's like a 6% return/year.

I prefer property. 5% long-term annual returns, and you get a rent cheque every month. Best combination of short-term income and long-term equity that I've seen anywhere. Condos in downtown hubs of major cities are essentially recession-proof.

You might just have been making money from a long bias there. Even if you try to balance your long/short exposure in monetary terms, you can still have beta to the market by e.g. buying $1k tech stocks and selling $1k utilities.

So basically, you need £5m to start with, which most people would consider pretty wealthy. Plus, it doesn't seem that much different from the old idea that the rich can just "live off the interest."

But I could also sock £5m into VBIAX, with 7% annualized returns, and clear an extra £50k. At that point, other than "I like day-trading", why would you want to do that?

You can make that much and more by passively investing in index funds. What's the appeal in day trading then?

That's less then 10٪. Long term stock market returns are around 7% and considerably less riskier.

Yes, long term 7% is the quoted number, however that can be over a couple of decades (maybe more) and you may need to endure a recession or two.

With a bit of active management, I manage to achieve 6-8% each year, but I avoid large negative hits that an index fund might endure in a bad market.

So, I'm sort of returning similar returns to market, but with less volatility in the bad times. I'm sorta happy with that.

5k to 5.3k is a 6% increase. It seems like day trading should be just about the riskiest/hardest way to get 6% a year.

The S&P 500 returns about 10%/year since its inception. (7% if you adjust for inflation.)

This reminds me of the joke: How do you make a small fortune? Start with a large fortune.

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