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After a number of requests by members and visitors alike, we decided to
compile our model portfolio performance figures and place them on line.
And while these numbers are based on a model portfolio, they nevertheless
still provide a pretty fair idea of how we are doing (and what might be
expected by following our service) when it comes to the our morning stock
market report.
So let's take a look at what the current numbers in our performance recap
really mean in practical terms by taking a closer look at our model
portfolio results from 2001.
For the year 2001, we had the following final totals: 1. Cumulative point total of 215.619So to get a better idea of what these figures mean in terms of "real world results", let's consider the above data from several different perspectives: First, for the sake of argument here, let's consider how we would have done if we had always bought 300 shares of every stock we profiled in our morning stock market report. Using the numbers above, we find the following: 300 shares X 215.619 points = $64,685.70Okay, so this shows that if we always bought 300 shares (regardless of price) then at the end of 2001 we should have had gains of just under $65,000 (not including commission costs) based on our cumulative point gains for the year. Okay, so far so good; let's continue. Now, let's consider how we would have done if we had always bought $10,000.00 of each position, instead of just using a fixed number of shares. That seems fairly reasonable and again, using the data above, we find the following: $10,000 X average percent gain of 2.559% = $255.90Okay, so if we always used $10,000 for each trade we covered in the report, then on average, our profit per trade (over 236 trades) would have worked out to $255.90 (again, on average for the year).
Okay, so pretty straight forward to this point.
But what about that cumulative percentage total figure? What good is that? Well, the cumulative percentage column is really just representative of "all the percentage yields per trade" added up. Because of this, it can give us an idea of the overall yield based on how much money we use "per trade". In the above example, we consider the results of using $10,000 per trade and we find that it resulted in $255.90 per trade. If we then multiple that by the number of trades we did (236), we get: $255.90 X 236 trades = $60,392.40And, aside from the fact that we have rounded our figures to 3 decimal places, we find that there is a correlation between the cumulative percentage total and the total dollar returns in relation to the total dollars "per trade" which we used. In other words: ($60,392.40 / our $10,000 per trade) = the 603.83% figureSo the cumulative percentage total figure represents the "magnification" of the total dollars "per trade" which you used (assuming it was a constant value per trade). Again, the above is off just a fraction because we rounded our results to 3 decimal places instead of 4 places.
Okay, great, but that doesn't mean we had a "600% total return for 2001" does
it? The answer is "no" (or perhaps better stated "unfortunately, not" :-)
And in fact, this question of "overall total percentage returns" does
come up quite often when people evaluate our past performance. But, in
order to really address this question properly, we have to have a starting
point of some sort. In other words, the question becomes gains in
relation to a "percentage of what?" when you are speaking about "total"
percentage returns.
Namely: how much did we start with and how much was
made from that amount using DayTraders.com's morning report?
However, so far, we can't answer that question, because we do not have a
starting dollar amount to calculate a return "of what" from.
So far we have only been able to figure out a rough "total return" based
on several different hypothetical situations (one using 300 shares per
trade; the other using $10,000 for every trade).
In order to really figure out the "percentage of what" question, we have
to make an estimate at "how much money would all this require". Once we
estimate that, then we can calculate a percentage figure.
So let's start by trying to figure out how much money would be required
in order to purchase those 300 shares for each trade. This won't be
exact, but it will give us an idea.
Let's figure it this way: on average we have about 8 open trades going on in the report at any one time. Using the figures listed above, we know that the average share price per stock covered in our report in 2001 was just above $36.00 per share. Using this information we can calculate: $36.00 X 8 X 300 shares = $86,400 dollars.Hey, now we are getting somewhere. Okay, so this tells us that if we always bought 300 shares of everything in the morning report, it might require around $86,400 dollars. Of course, the question of whether we are talking about using margin comes in to play here, but for now, let's just use rough numbers and not get overly "exact" in our extrapolations. When we started all this (above), we discovered that if we always bought 300 shares, our returns by year end would have been $64,685.70. Armed with this information we can then deduce our approximate "percentage return" as follows: $64,685.70 / $86,400.00 = 74.87% returnHolly cow, 74.87% annual returns! Somebody get Warren Buffett on the phone, quick! And if you can't reach him, try Bill Gates or Donald Trump! :-) Okay, first off, it may take a little more than $86,400 to comfortably follow our report with 300 shares for all trades. In other words, we may want some "comfort level" to fall back on here. So just as an example, if it took more like $100,000, then naturally our "percentage returns" would go down accordingly: $64,685.70 / $100,000.00 = 64.69% returnStill, that's nearly 65% - try Warren Buffett again! Quick!
Seriously though, you get the idea. It's difficult to pin down real world
results like this - but even if we increased the money used to purchase
those 300 shares to $200,000 (and this sounds very reasonable), then you
would still easily be over 30% returns for the year.
From this standpoint, it's perhaps easier and more logical to look at the
cumulative point gains for the year and then apply a "I would buy 100,
200, 300, 400, 500, etc. shares of each" to determine what your resulting
dollar amount would/could be. From that point, you would just let the
"percent return" figure fall where it may based on how much money you
started with (if that was even a factor as long as you had "enough" money
in order to purchase whatever number of shares you decided on when you
began using our report as a guide).
With that said, keep in mind that not only do we have the benefit of
hindsight in our report to some degree, but we also do not experience
execution delays or the emotional roller coaster that comes along with
really having your money in the market and at risk (however, we do see
membership go up or down based on how well we do in the report and that
does translate into real dollars and real risk to our company - so it's
very similar and taken very seriously around here). Additionally, we work
very hard to represent "real world" results based on how the stocks we
follow in our portfolio trade during the day. The bottom line here is, if
you don't trust us to at least do that, then you probably shouldn't be
using our service in the first place.
We make no bones about the fact that your results may be higher or lower
(due to issues such as cost averaging, trade management and order
execution) than what we have listed on our site or in the report.
However, with that said, this performance recap still gives you a very
good "real world" view of how things are going with our morning report.
If we do well, then you should do well. Even if you only duplicate the
results 80 or 90 percent as well as our model does on a daily basis, then
you should still be off to the races when it comes to your own trading.
And for $49.95 a month, we feel that's quite a bargain! :-)
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