(Profit - Labor) / (Risk*Investment) - PrimeRate is a good indicatior if what you are doing is really good or bad. Risk is calculated as (36 months / (Total profitable Months - total loss months) in the last 36 months). If you traded less than 3 years but more than 12 months, use the total trading months. Mine is, considering it costs me a 100K full time job and I never had any down month. (Profit - 100K) / (1*Investment) > 60% I am an investor, not a trader, so I wonder if trading has better return than investing. My trading fomular is (Profit - 150K) / (3*Investment) Becaues trading cost longer time, more hair, and more wear on health, so I added 50k more. I can only make 2 profitable months out of 3 months in trading, so I only make 1 month profit net in 3 months, thus risk factor is 3. Also, I wonder if you can make more money if you have more capital (Scalablity). For me, I am not sure if I can still make every month profitable if I have more than 5 million, because I mainly invest in low price, low volume, value stocks.
The book How to Create and Manage a Hedge Fund contains these rules of thumb: minimum Assets Under Management to pay all fund costs and achieve breakeven: $9 million Assets Under Management that pays hedge fund founders a very nice annual paycheck: $100 million average Assets Under Management across all hedge funds: $100 million We can conclude that the founders of half the hedge funds in the world are receiving a very nice annual paycheck, and the other half aren't. The book calculates these figures based on assumptions of 1% mgmt fee, 20% incentive fee, $350K/yr fund costs (salaries, rent, computers, legal, acctg).