One of the things that intrigues me about the finance industry is that people don’t seem to fully think through the implications of the statements they make. For example, someone popped up on my LinkedIn profile yesterday claiming that their people were making 10%pm using a given platform. There are several things that are interesting about this. You would think that someone on LinkedIn would know better but then it has really just become Facebook for people with a job and a stupid made-up job title like Digital Change Disruptor Guru (which is a very long way of saying wanker). And that they simply didn’t give anything thought to what this throwaway line actually meant. It’s almost like 10% sounds good I will just say that.
If the person uttering this genius statement had given this number any thought they would have realised how stupid it is. Doing a bit of simple work in excel would have shown them how galactically stupid it was. As you would expect I took this magic number of 10%pm and let it run for five years with various starting amounts. Since we are making 10%pm I compounded this figure on a monthly basis. After all, we are trading FX so there is no hanging about waiting to compound yearly. You can see the inevitable results below.
Even if you start with only $10k you still do exceptionally well after only five years – if you were to keep it up for ten years your account balance would have grown to a staggering $927,090,688.18. Perform the same calculation over ten years with a starting capital of $1M and you end up with $92,709,068,817.83. At this point, you may want to tell Jeff Bezos and Elon Musk to just move one spot down the table.
It is stupid and idiotic but someone will fall for it.
Perhaps CT your LinkedIn admirer looked at the moon the other night hence the epiphany of their statement 🙂 TGIF
mjh