I have been trading for 2 years and now I found a good and simple strategy which works fairly well and can generate significant profit.
Now I want to expand my business and what to do?
My plan is fairly steady, I’m not looking to join the super-rich (I don’t want to spend time with people most of whom I probably won’t like).
I aim to double my account until the annual trading profits equal an average decent salary per year. At that point I will withdraw that salary, but keep trading, withdrawing the same salary every year. It will be like having a decent job without having to do the work.
Extra gains will probably only come from taking on extra risk, and that’s not justified.
2 Likes
Hi @tommor ,
Last month I nearly succumbed to doing that, in stages. I was going to withdraw 1% per month from our crypto portfolio, but on reflection, decided not to -at least for the time being. I decided to sell some expensive toys instead in the real world to postpone this decision. Last month it was a 18kt Omega watch, now off to check for some more mundane stuff. What changed my mind was the recent price action on gold, silver and the ratio between the two. I remembered back to when I was technically bankrupt, about 33 years ago, and thought “life is so much simpler when you have nothing to lose”. We are indeed luckier than most in this sad world. 
2 Likes
Hi,
Why change the habit of a lifetime? If you are generating significant profit, and before you expand your business, do you have excellent control over the expenses side of the equation?
About 30 years ago my wife and I decided to set three budgets - a minimum, a target and a stretch. I was a salaried expat and my wife also worked so we lived off her wages for over 3 years.
If you know your minimum cost of living right now, and be honest with yourself, you will know at what time in the future your significant profit from your good and simple strategy will generate net funds after tax in excess of your minimum cost of living. That is the definition of wealth, so if you already earn more from all income earning pursuits than your cost of living, you are by definition wealthy. If you wish to accelerate that timeframe of when your total income will exceed your total costs, get some good debt, get rid of the bad debt, and leverage your simple strategy with funds borrowed as good debt. Examples are houses let to tenants (substitute this with any asset that earns an income exceeding your cost of ownership)
To me, that is the least risk path to becoming (or remaining) wealthy
I have a friend who’s into watches now, they seem pretty lucrative. At least back during the peak of the pandemic!
Hi, I have a friend who is into Timex watches. He probably only trades two or three per year, but it is a niche that he has been doing for over 10 years, so he knows the value. He only buy watches that are severely mispriced, and the money is not big, but he participates to keep his knowledge current. He also has an interest in old British racing cars - buys them, drives them for a while, then sells them. The currently drives a TVR but I don’t know which model or age.
I think every Forex trader should choose a real object or two and do some deep research into that object’s specific market. The knowledge can be really useful for trading currencies too.
1 Like
WOW! So many great findings
Wow he must have developed true expertise on Timex watches then!
Thank you for your advice.
I want to make a stable growth.
What would you do, if you were in my case.
Hi,
Sorry I cannot answer that question, because I do not know you, and therefore do not know what your aspirations are and what is your tolerance for risk. If your patience can extend to 30 years, I hope the examples below will help. Best of luck with it.
I can offer some general advice that I think will apply to most people. I learnt this at 3am in a bar at a management course (paid for by my last employer around 1992). I was chatting to a 21 year old roofer who had been invited onto the course to meet “normal” business managers, and to explain to us normal managers how he had grown a business at 21 years old from starting work as a roofer apprentice at 16 years old, having accumulated over GBP 1 million in cash in the bank (after taxes). He had ten direct reports and each of those direct reports had between one and twelve roofers. Each roofer was self employed. He was a simple guy but a lot more clever than he gave himself credit for.
He said “I have three rules in my business”
1 If a roofer team lead or a roofer has an accident, he never works for me again. Health and safety is in the hands of the self employed and evidence of conformance is in the hands of his team lead. One strike and they are out.
2 At the end of the job, both the roofer and his team lead must have more money in their hands than when they started the job. Without exception.
3 The roofer who is in charge of his job must always earn more money from that job than his direct team lead.
He also did not mention this as a rule, but there were no other job roles in his business. Just roofers, and two levels of hierarchy. He never understood why businesses needed marketing, sales, finance or other “none-income-earning” roles that just sucked money out of a business. If you are very good at what you do, you don’t need anyone else to tell you how to run a business.
I will reinterpret that.
You already have a holy grail, but I suspect it still does not flow cash into your life as fast as cash flows out of your life. Here are the ratios that I have stuck to in my life since 1988.
1 Strive to have a total income of more than 30% of everything you spend (after tax). Even if you are hopeless at investments you will double your money every year. If your holy grail is a gift that companies will pay you a lot to make use of that skill, then avail them of your skill. Every contract can be a riskless adventure. My wife and I lived for three years on her wages whilst my salary and bonus went straight into a savings account in Switzerland at the time. What could you do with three years’ gross salary and bonus and absolutely no costs. That wasn’t me being clever, it was just the par for an expat manager package at the time. Spend 30% on mandatory costs (rent, food, mortgage, hospital bills, utilities, dental, etc), spend 30% on discretionary costs (coffees in the cafe, meals out, takeaways, cinema, holidays, etc). This is the really hard bit, so I l use an Excel spreadsheet breaking down budget cost by line item. Spend up to 10% on gifts and charitable contributions. Keep charitable close to home. Nobody can solve the problems of 6 billion people, so anyone who helps the 10th poorest of their family the positive impact would be enormous. Try offering to pay for a study course or an apprenticeship for a distant nephew or niece, and see how your life improves beyond your dreams
Spend up to 30% on reinvestment. Your tax status will negatively impact this one hugely. So get an accountant as soon as you can. And if you can’t afford one, get up to speed with our allowances as soon as possible, and ask people who are self employed what they do. Most just pay an accountant (too much) and trust they will know everything about mitigating your tax. Most don’t. They charge their fee and don’t think twice. I should know - I have had five accountants for our personal taxes for over 20 years. Every five years, I send out a bullet pointed “statement of requirements” to the incumbent and to three or four other accountants. Often, none of them reply. So I just keep repeating. Three years ago I halved the fees just by asking.
30% + 30% + 10% + 30%. Very hard to achieve consistently.
Two other limits that have served me well over more than 30 years. The first is about cars. It helps I used to own a scrapyard. Never spend more than 5% of your assets on a car. If you don’t possess more than 20 times what you want to spend on a car, don’t buy a car. And there are perfectly acceptable cars in the UK for under £1,000. If you have to borrow, then just borrow £1,000 over one year for £100 per month. If the income for which you need a car can’t justify a £100 per month loan payment, use public transport. Cars depreciate more than any other item most families own. I drive an E class Mercedes because I like them. Don’t suit young people but I am not young. I know employees who drive similar, new cars as part of their “work package” and pay tax on their income because it is deemed as a “perk”. I don’t like borrowing money for buying cars. I refer to this as bad debt (debt that does not earn an income). My Merc is now 8 years old, has done 135K miles and has a full service record. It is worth 20% of its list price, I have had it for 3 years and it has depreciated £1K per year. A new one depreciates about £10K in its first year. It only needs to get me from, a to b and on a good day it achieves 55 miles per gallon. My two sons drive two year old Corsas that I paid cash for. They were 60% off list price of new because they had both been “written off” by the insurance companies - one had done 4,000 miles, the other 7,000 miles. I expect them to depreciate at £500 per year, not £5K per year. The property, on the other hand, had quadrupled in value over 22 years, and has generated, to date, a £600K value which when sold will attract zero income or capital gains tax. It is our home. The second rule is try never to own more than 25% of your home. Remortaging your home is by far the cheapest source of cash. If you borrow money on your home at less than 2% interest per year, and pay all your current credit card debt with it, you make about 1,000% return on your capital provided you continue to exercise these cost controls.
Back to the ratios we exercised for 30 years.
My wife had a serious penchant for gold - of the jewellery and sovereign type. We agreed that all my salary went to the bank, but that we would consciously spend all of hers. Because my wife loved gold so much, any money we had left over at the end of the week would be spent at the gold souk in old Damascus. At the start this was as little as $250 per ounce and as much as $400 per ounce. Our costs were food and ------ not much more. As an expat, my employer paid to lease my accommodation, all the bills, entertainment allowance for customers, a brand new car, my tax obligations in country. I estimated my net income after tax was six or seven times that had I done the same job in my country of nationality.
Wind forward now 30+ years. We have four streams of income. The bits in between have been entirely as a result of limiting our personal spending to about 75% of overall income. Each year may have been wildly different, and what you plan is never what you get. For example last year our total income halved. I was off consulting work for nearly 11 months. Now I am back at consulting work, so no problem there. We were still running on three cylinders out of four.
Oh, and the next thing to plan after you concentrate on doing more of what you are good at, decide your end goal, and don’t forget about inflation. Our three levels of goals are:
Minimum - be able to not have to rely on any government handouts until the age of 91. Statistically we have an 80% chance of being dead by then, and after death, nothing matters. You can’t take it with you.
Target goal - Be generating an annual income equivalent to 10X of a national state pension.
Stretch target - intergenerational. Target goal plus not needing to amortize any income earning investment. In other words, have your cake and your kids can eat it too.
We have not reached stretch. Over short periods we have envisaged we may reach it within a few years, but things don’t always go the same way, upwards, and linearly. Three months ago I would have told you we were about to sell about 1/4 of our crypto investments. We got within 10% of the value at which it was planned to do that. Today, I am replanning (with short term crypto losses of over 50% since January) when we are next going to BUY more crypto. LOL. Life is a problem and then you die. 
1 Like
It’s really cool that you have managed to create a strategy which works and brings profits. Of course, the market is a dynamic thing and there will be a time when your strategy will be either less profitable or won’t work at all (hope that you will find some ways out before facing such a situation). Anyway, if you wanna expand your business, then you can either sell your strategy for solid profits and start working on a new one, or you can continue trading, gaining money and simultaneously thinking of ways how to create another strategy which would be suitable for contemporary conditions on the market. At least, it’s my opinion what are the options for you at this stage.
1 Like