Road to $1,000,000 — Strategy and Tactics
TL;DR
In this post, I’m discussing how I’m going about achieving my first $1,000,000.
Legal Disclaimer: This content is for informational purposes only. You should not construe any such information or other material as legal, tax, investment, financial, or other advice. Nothing contained below constitutes a solicitation, recommendation, endorsement, or offer by me or any third party service.
The Goal
As the title said, the goal is to achieve $1,000,000. I often read that the first million is the hardest. After running some very optimistic projections, I can hit that first million pretty much within the four years and achieve the second million just several months later. I also start with a minimal amount of capital and affordable weekly contributions.
Note: In the image above, we see dips after the end of each year to pay capital gains taxes. In this case, I just took out about 1/3, or 33% of the total value. These dips won’t precisely match up in real life since I didn’t start week one at the beginning of a tax season.
Depending on your perspective, hitting a million at roughly four years is either a fool’s dream or that’s way too long. And I don’t blame you. I tried to try various unconventional strategies with ranging time frames, and this was the most stable with the risk I could tolerate. By now, you’re probably wondering exactly how I am planning on achieving this.
The Strategy
The overarching strategy is to take advantage of compounding gains. I plan on obtaining 5% returns on invested capital every week. Additionally, I also contribute $50 a week for the first several months to allow the fund to achieve inertia faster.
Depending on your experience and perspective, 5% is either really high or unremarkable. For me, it fit my goals without being too aggressive and unrealistic.
And, when I said invested capital, I mean ALL my allocated capital for this project. I’m putting in all my money every time. If that didn’t scare you off already, think of it this way. We start with a minimal amount, $100. Losing 5% in a bad week takes us to $95. We can afford this risk as long as we do it smartly.
ANOTHER DISCLAIMER: I must also say, I have the majority of my investments in more traditional portfolios that I actively balance and follow conventional investing wisdom. This entire project is an experiment, a moonshot, if you will, that if successful, will reap life-changing rewards, or I lose a couple of thousand dollars over several years. Those losses will be tax write-offs, so there are some silver linings.
Let's continue….
When you think of high returns, the gains of Tesla or Zoom usually come to mind.
Look at those gains! 730% and 419% within a single year. If only we got in early. All jokes aside, picking these kinds of unicorns is extremely hard. Tesla has always been the contention of financial analysts, and Zoom realized future growth because of the pandemic lockdowns. I wanted to draft a strategy that returned similar results that didn’t involve finding these rare kinds of stocks.
Tactics
With a strategic objective of hitting 5% returns a week, I’m developing tactics for achieving this. First, I can hit my target with a single trade. Second, I can more easily spread it between 1–2% a day. Since I’m starting with less than $25K in investment capital, I’m swing trading throughout the week or very minimal same-day trades.
If you’ve followed stock movements, you’ll have already noticed that 5% movements in a single day, let alone a week, are not that uncommon. Observing a 1–2% movement is also reasonably common. We may even see that 1% move multiple times a day looking at intraday movement. Below we’ll look at some of the stocks on my watch list.
We see that today, 31 Dec 2020, is not a good day for my watchlist. I own stock in SNOW, so let’s take a better look at it.
As of this writing, SNOW was down over 6%, but I find a single movement of 1.23%. SNOW is probably too risky of a position for most people to get into since we don’t see many instances of this stock trying to recover after being bearish.
Now let’s look at another stock on the list.
LMND was down 5% this day, but we see multiple spots where we could have made our 1–2% gain for a day. Perhaps day trading seems too risky. You often hear the horror stories of people losing all their money. Let’s look at what this stock has done this week alone from Dec 28–31, 2020.
Wow! 22% I could have just got my entire week and then some in a single trade. These are the kinds of trades we take. We evaluate, analyze the trends, and execute. Nothing really new. Where traditional traders often follow a 2:1 Profit/Loss ratio, I’ve decided to frame our objective around target weekly returns and taking advantage of compounding these returns throughout the year.
Am I doing it, or is it all talk?
That’s a valid question. I intended to start this several months ago, but the pandemic happened, so I had to hold off. As of right now, I’m currently on week 3.
Currently, I’m tracking everything in Google Sheets while I build my infrastructure to better handle this Midas experiment. I’ll be better at showcasing how I screen stocks in future posts, and I’ll be sharing my algotrading progress as I apply it to this project. If you enjoyed this, follow my profile for more content coming soon!
