• Using stocks as a supplement to other investments, to gain a higher overall return. This is a good and worthy goal, but lacks quantification. What return do you need to make as a minimum?
• Wanting to gain financial independence: How much money do you need to be free from the system.
• Retiring early: How long until you retire, can stocks really speed this up.
• Getting rich quick: This is a popular one, but almost impossible, except for those that are extremely dedicated, and extremely lucky.
• Beating the market: A good choice, but what is beating the market?

Quantify your goals.
In investments you do not know when your goal is achieved unless you put a number on it. But what should that number be?

The Minimum Goal.
One of the very first statistics I heard whilst on a Trading & Investment Seminar over a decade ago was.
“The Stock Market makes 10% per year on average”. To beat the market you need to beat 10% per year, every year you are investing.
Well I thought I would test this on the Standard & Poor 500 (SP-500) index. I tested from 1970 to 2009.
Opening Price 2nd January 1970 = 92.06
Opening Price 2nd January 2009 = 931.80

This equals a 6.5% per year annual compounded gain.

I also looked as the Dow Jones Industrials (DJ-30), from January 1916, to January 2009, and the figure was a 5% annual compounded gain.
So as a minimum, to beat the market we could say, you need to make at least 6.5% per year.

The Real Maximum

So what is the realistic maximum? What do the best of the best achieve?
Warren Buffet : The Oracle of Omaha.
The 2nd Richest man in the world according to Forbes in 2003 with an estimated net worth of $30 Billion. He is a self made billionaire who made it all from investments in stocks of companies.
Annual Compound Rate of return of 24.7%

George Soros : The Man who broke the Bank Of England.
In 2003 rated by Forbes as the 38th richest man in the world, a self made billionaire with a net worth of $7 Billion.
Annual Compound Rate of return of 28.6%

So it would seem over the long term, if you can achieve a rate of return close to 25% you are doing extremely well, in fact you are among the best of the best.

Putting it all in perspective.
As you surf the web, you will be accosted by certain “Get Rich Quick” schemes, offering you amazing rates of return on your money. Typically these take the form of Hot Stocks Newsletters, Special Trading Systems, Personal “Rags to Riches” stories to touch your emotions, and for only $50 you too can learn to secret to unparalleled wealth.

Do not believe the hype. Do not expect more that 25% per year, at the very most. Ask these people, if they are so successful, where are they on the Forbes Rich List?

I was called by phone 2 weeks ago by a gentleman who would not reveal how he got my details.

This is a true story of how the conversation unfolded.

Salesman: Hello Mr Moore?
Myself : Yes
Salesman: I was informed by a colleague of yours you might be interested in high growth investment opportunities.
Myself: Which Colleague ?
Salesman: Err. Sorry my records do not contain the details, I think it is in another file (Alarm Bell Number 1)
Salesman: Do you invest currently Mr Moore?
Myself: Yes I invest
Salesman: Well maybe you would be interested in an opportunity we have developed with the Brazilian government. We are buying land that will be made available for residential and commercial development in the next year, but we can buy the land at pre-approval prices. We have calculated a % return to our select group of investors of 2000% in the next five year.
Myself: Really, (I say feigning interest, and thinking to myself, this should be fun)
Myself: What is the risk?
Salesman: There is no risk Sir, we have a contract with the Brazilian government, and we simply need to make the investment. (Alarm Bell Number 2)
Myself: So you believe that if I put $50,000 into this investment, I will be a millionaire in 5 years?
Salesman: Yes, err, if that is 2000% yes.
Myself: You will be able to return to me a yearly profit higher than that of the 2 best Investors that ever lived.
Salesman: Hung Up.

Learn Stock Market Trading and Investing with FREE Education and Training on Stock Screening, Stock Charts, Candlesticks, Technical Analysis & Fundamental Analysis and Stock Chart Indicators, Trading Academy Membership is free register here.