Take 5K and double it 25 times. You will end up with little over 5.5 billion. Start with 5K and invest all in a company that has a strong chance to DOUBLE in the next 12 months. At end of 12 months, liquidate and invest ALL in next company that has best chance to double in next 12 months. Continue for 25 years. Impossible? I say not. Just don't complicate the search. If you get up to 100 million say, and lose it all, think of it as only losing 5K. That was your risk. The rest is the house's money. Works best in a Roth IRA. Tax free compounding at its finest. If you contribute the maximum allowable for that year added to that year's profits, it will compound even faster. 5K to 5 billion assumes a 100% perfect market scenerio for 25 years. More than likely, you'd end up with 100 million or so at the end of said time period. Now where to find those "wonderful" companies...
If you identified a swing trade on a stock play (or any other instrument for that matter) that lasted a few days/weeks/months, put some leverage behind it (risking say 5% per trade) and did that successfully 25 times you might achieve the same result in far less time. For example if you bought GOOG on margin/options about a month or two ago you would have doubled your investment. Repeat, compounding your account as opportunities show up.
<i>"Impossible? I say not. Just don't complicate the search. If you get up to 100 million say, and lose it all, think of it as only losing 5K. That was your risk. The rest is the house's money."</i> Uh, $100 million is more than the total market-cap of most companies that double in growth. Think you might run into a modest liquidity issue somewhere in your 25 rolls of the dice sequence?
the biggest challenge in your scenario is that you have to overcome your losses, ie your assuming you pick only winners. Everyone on this board understands you have to make more as % to overcome a smaller % loss initially.
BearBelly - If one loses a set %, then one needs to earn 100% of that % to break even. Ex: A 50% loss from 200 is 100. Now that 100 you're left with has to double (100% gain) in order to break even. It is difficult to find 100% gains in the marketplace so keep losses small initially. That's where the mantra comes from. NZDSPeCIALIST - I mentioned this strategy works best in Roth IRA. Otherwise you're looking at approximate 40% tax bite per year. Roths do not allow margin purchases and only covered calls can be SOLD as far as option plays go. Plus margin interest eats into profits. I prefer the "safer" route of no margin. 12 months is plenty of time for a worthwhile stock to double (Small to Mid Caps, of course) Austinp - After the first $10 million or so, I see problems with execution, especially a retail trader. The slippage will be severe. To continue, you'd need a hedge fund-like execution platform. Also, if any individual or entity purchases 5% or more of an existing companies float, one must file transaction with SEC. There are loose criteria I've discovered with companies that double in 12 months: 1. You must discover them before anyone else. That means no headlines, little analyst coverage and institutional ownership. 2. If the stock makes it to Monday's Investor's Business Daily top 20 on the front page, get out! Top is near. I've already begun. This past summer I purchased 268 shares of DirecTV (DTV) @ 18.60. We'll see what happens next summer!
I try to hit singles over and over rather than home runs once a year. I do believe you will eventually go broke with that strategy.
P.S. I use no stops. This is a buy and hold investment. Not a swing trade. DTV dropped 3 full points after purchase. It's holding up nicely now. 5K is lunch money. This will be an interesting experiment.