Lets say you have a profitable nearly guaranteed 5% monthly profit, although rarely you could have a negative month etc. If you wanted to live off the profits, what would be a good strategy, to work a job and accumulate a large account like >2mil over 4-5 years? or do weekly withdrawals and just live off that. Anyone doing this right now? Lets assume the broker is an honest one and lets you withraw and doesnt introduce fake outages or slippages etc.
If you have an account that generates 5% profit per month and all your profits go towards your regular bills then all you’ve achieved is you’re unemployed.
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Hi ZoraEggs,
This may look like a dumb question to many people, but I have just spent a significant amount of time doing some iterations in Excel about exactly this topic. It has led to some interesting questions (that I asked myself, and that I ask you to ask yourself).
How much is enough? Everyone is different. My own goal is to ensure I have equity funds that total about 20 years of future annual spending before I consider myself retired.
That means if I plan to spend £50K per year in retirement, I will only feel fully protected against future events if I have £1M of net equity.
So taking the example above, that £50K per year of annual spending would need to come from a number of sources of income, earned or invested. Let’s say, for your short term goals, and you expect your job provides more than 100% of your intended retirement spend.
Considering the 5% per month from the nearly guaranteed source of income, 5% per month compounded is about 80% per year compounded. Assuming that the 5% per month does not change with increasing the capital you make available to that source of income then if you take half of it out each year as income, compared with leaving it all in the source and living ONLY off your earned income, this is how a £10K bank assigned to this source of income would grow over 5 years.
A. If you live off your job earnings: £10K>£18K>£32.4K>£58,320>£104,976, thereafter take 50% (£52K) out as income and leave 50% in there to earn 35% per year.
B. If you start taking 50% out after each year: £10K, £13.5K, £18,225K, £24.6K, £33.215K. thereafter take 50% (£16.6K) out as income and leave 50% in there to earn 35% per year.
If you use the compound interest formula in Excel, you can run this scenario for an infinite number of combinations of how much you take out and how much you leave in, but you can see that after 5 years only, the difference is dramatic. So in my case, if Trading was the only future source of income I had to look forward to, and I started with a £10K trading account, I would need to leave ALL the capital in the trading account for at least five years until the value of the account were £100K for me to be able to withdraw £50K per year. The equity in the account would be 50K * 1/0.35 = £142,857, growing at 35% per year or £50K. In my earlier years, our equity was compounded at quite a high rate, as much as 100% per year, because a large sum of it was from earned income savings. Over the years, I would be delighted if earnings from ALL our investments were anything like 7%. Time will tell, but if you have a source of income that almost guarantees you 5% per month, don’t be tempted to change what you are doing. You are doing three times as well as Warren Buffet. In fact, if your source is Forex trading find a sponsor that will let you trade with THEIR money and keep up to 80% of the profits, in which case you have perpetual income and don’t need to worry about the equity. 
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Accumulate a large account like 2 million over 4-5 years.
Good Luck.
Also you don’t need all your money in the broker.
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Thanks for the great reply. My plan is quite weird, ultimately I want to live off passive income while laying on a beach in thailand somewhere. One can dream right. I have lots of other ideas for other businesses besides trading and see trading as a sort of side income which is a bit unpredictable because one day my trading method might completly stop working. This video got me thinking about the whole compounding thing though: https://www.youtube.com/watch?v=8tyEApjB_iQ
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I like your plan ZoraEggs, but you need to ask yourself if it is feasible with your invested amount and current return of 5%. Forex is not a bank account from which you earn income every day. In forex you need to be continuously there and adjust your strategy when needed.
Hi ZoraEggs, and thanks for providing the link. I had watched this vid before and dismissed it but when I heard him talking about Darwins and Darwinex, I was curious so did some Google searching. I was surprised to see some very good reports in ForexPeaceArmy from account holders, and I have bookmarked them as a future possible broker. But since it distracted me from my BabyPips progress, I will do that later.
Thanks for providing the information. Very useful.
Hi again, Last time around (2014) I was following a group called Currensee that had traders you could follow trade. I saw this business has been bought up by Oanda and now has really frequent annoying ads with Alex Baldwin with a sock puppet. The ads must be working because I can remember Oanda from that. Anyway, whilst I was following their trade success with a demo account, I did put in my notes that I would been up over 20% over three months had that been a live account. I got distracted with other things, but it is an option I would not fully discount whilst taking the long road to success with BabyPips.
My kitty 2 cents would be to figure out where the 5% is cammin from. 5% of a big account would be nice and feasible if it is substantially lawwger than your average monthly expenses and some contingencies.
Take the 5% gain you have, cut it in half.
As ol’ Livermore said, we chop da gains in half!
Is half enough for you to live on for needs wid a wittle extra for wants? If yes, assume the other half is for portfolio growth or alternative kitty investment. If we take a 10%(?) drawdown (for emergency/ unexpected booboos) in da middle of a given year, are we still kitty alive? If yes, then you may have reached kitty freedom! Good luck and enjoy! 
Hmm, I must be very old or very poor or both. Last time I looked I knew about one person on earth that “needs/wants” $27K per month (£20K+ per month) unless you live in London and have to fork out a repayment mortgage on a £4M penthouse. A touch of realism on both portfolio start capital, and on monthly gain (say, halving it to 2.5% which I would be over the moon with). So halving capital to $500K and halving gain to 2.5% ($12,500) you would have to survive on a pittance of $6,250 per month in order to save 50% to compound the bank. Oh, that’s £57.7K per year before tax. Beats a state pension.
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So now I am confused. Forex Peace Army Reviews | Read Customer Service Reviews of www.forexpeacearmy.com
Please send me any link to a scam thread that I can rebalance my fake news / fake news dilemma
Depends on your expenses, interest rate and intertemporal consumption. For example if you can be frugal for some time now you can consume more later thanks to compounding. Or you can prefer to smooth your consumption in time (i.e. maintain at some level), then it may be worth to increase spending in income. It is not a trivial task and of course depends on our consumption habits and preferences. For example I withdraw 500-600 USD of my trading profit monthly and the rest is reinvested.
Just put forexpeacearmy into the BP question search. There are plenty of comments in threads.
@Johnny1974
Hi and thanks for response. I looked at the entire first page. Only one of those threads is current year and that was a response to a thread started in 2017. It was a member recommending the newbie visit forexpeacearmy. Is there a specific thread, then, that either refers to “Russian Mafia” or that makes accusation that ForexPeaceArmy is to be avoided? The reason I ask is the same mindset that I am learning on BabyPips - don’t take anything for granted and get evidence that an indicator is true before entering a trade (in this case before entering any discussion with any broker regardless of what is said about it on the (non-fake news) internet.
@Mondeoman
Just go into thread Sept '18 ‘Forexpeacearmy Scam or not ? What you think !’
Google Dimitri Chvavkerov Forexpeacearmy.
Tough one as few of us will ever make a good full time income just from forex. I would suggest looking at other income streams as well to negate the bad months you may have in forex.
Hi Johnny, thanks for your perseverance. I have spent about half an hour looking at the links, and I have to agree with you that all does not look well with Dmitri.
Thanks for the heads up. You are my “second confirmatory signal”
