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The Secret is out!
And Peter Drucker once said, “What gets measured, gets managed.”
So we need a tool to measure our Investment/Trading performance over long term e.g. 5, 10, 20 or even 30 years. For me, I use Average Annualized ROC (Return On Total Capital) to measure my performance and managed it for success.
Computing for the Average Annualized ROC is quite simple. All I have to do is to add the total Realized and Unrealized Profit/Loss and divide it by the Total Capital, and then divide it by the Number of years. Thus, the formula is:
Average Annualized ROC = (Total Realized + Unrealized Profit/Loss) / Total Capital / No. of Years
What is your goal for investing over long term? Mine is for Retirement fund.
Why should we need to evaluate our investment performance? The main reason is to perform an objective analysis of our investment performance to overcome self-deception or over-confidence and take a sober, non-emotional assessment of our investing returns and consider whether we are either under-performing or meeting our GOALS.
We have to remember that the only reason to invest is to create more wealth. If we are not building up more wealth over a period of time, then our strategies may not be effective, and we may have to seriously review and change strategies.
Insanity: doing the same thing over and over again and expecting different results. said Albert Einstein
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