I'm going to be a billionaire?

[MathsFormula]

Hi

I started a demo account on stock market investing firm. Some of the claims of returns that traders make are astronomical.

I invested £4000 (fake money) and made £25 profit.

Can you check my calculations please:

1. So return on investment (ROI) is 0.625% Calculation = (25x100)/4000

2. If I do the same every day for 260 days per year (not compounding the profit) that gives ROI of 162.5% [£25 x 260] = £6500 profit

Money in account = £10,500

That's amazing given that a typical UK high street bank offers say 4% AER (annual equivalent rate)

3. If the £25 daily ROI is reinvested (compounded) the total in account = £ 26,903.48 (profit is £22,903.48)

A=4000(1+0.00625)^260 This is the calculation from internet

4. If I compound for 2600 days he profit would be $56,458,735.60

This is unbelievable. AS IN I DON'T BELIEVE IT CAN HAPPEN. But the maths is correct above????


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5. So maybe the ROI on my first day was a fluke and instead I only make ROI 0.1% daily, that 26% after 260 days

Still much more than a bank. If I compound my winnings for 2600 days, that makes £ 48,729.96 in account


I'm trying to persuade a friend to join me in the trading journey but he's convinced my maths is wrong. Please advise

 

[khansaheb]

Hi

I started a demo account on stock market investing firm. Some of the claims of returns that traders make are astronomical.

I invested £4000 (fake money) and made £25 profit.

What is the time period to earn this profit?

 

[blamocur]

But the maths is correct above????

I get different results. For 260 days I get compounded result of 20,211.21, i.e. about 5-fold of the original investment, and for 2600 days I get 43,389,312,490.87 (that is more than 43 billion).

But daily gain of 0.625% is huge! For example, in the US the market has been quite good, and S&P index added about 80% in the last 5 years, which at 12.66% is still better than 4% in your bank. This daily gain would correspond to about 0.033% of compounded daily gain, which is almost 20 times less than your example. This more realistic gain would get you about 4,354.26 after 260 days and 9,345.56 after 2600. Also bear in mind that we are talking about good market years.