what's your morning routine?

I plan to retire early, but I am not fully funded yet, as I have been in practice for only 7 years. My "magic number" to retire is 5 million.

My first year, I started a 401k, with no principle, to which I add $4,500 per month. Let's assume I earn a average annual rate of 15%, and pay no trading fees. It would take over 20 years to hit the 5 million mark in this tax-sheltered account. I won't have access to these funds until 2031.

Additionally, I put $100,000 in a trading account my first year, and add an additional $40,000 of principle per year since then. In order for me to retire this year, I would have had to make an annual rate of return in excess of 60%, ignoring taxes and trading fees.

I am beating that 15%, after taxes and trading fees, but I am no where near the 60% annual rate. My guess is that I will be able to retire somewhere around 2025-2028, but I doubt I will want to at that point.

I still enjoy anesthesia, and even if I was in a financial place to retire tomorrow, I wouldn't just yet. I would go to half time if the practice would let me.

I suppose the only thing that would get me to retire immediately is winning the lottery, and that is only because of the astronomical increased risk of lawsuit if I couldn't keep the lottery win private.

 

Just because someone outperforms the market, doesn't mean he immediately has enough principle to live solely off his trading profits. Also, the bigger your account, the harder it is to outperform. I can fill a $20,000 SPY options limit order at the drop of a hat. I'm sure that it's a lot trickier to quickly move $1 million of SPY options. Market orders on a $20,000 position might be tolerable, on a $1million plus, not so much. The Market Makers will absolutely rape you, and while they may not notice a 20k order, they are certainly going to notice a million plus.

At my current rate of return, it would take an additional 5 years before I had enough principle in my trading account to retire and live off of the gains (assuming I could maintain this rate of return in perpetuity). Of course, there is no guarantee that I can maintain this rate of return, so I won't retire until I have some safety margin to tolerate a dip.

 

POD, do you think some of your success may be a reflection of good timing in regards to overall market performance the past 7 years?

I'm not trying to bust your balls, but you are saying you have an annual return of 15%. The annual return of VTSAX (with dividends reinvested) over that same period of time is right about 15%.

 

How do you put in more than 18k/year to the 401k?

 

Employer match up to maximum. Many PP groups do it this way.

 

Depends on what bs meeting I have to go.to pre-op lol. Joke!!

Up at 6 most mornings. Bike to work after some chinups and whatever. Breakfast is a banana and fish oil pre bike ride... Or ready most times in 20 mins sometimes longer if bigger case...
Meetings at 7am. Knocking the patient out at 7.40

 

I never said I have an annual return of 15% over the last 7 years. That is a benchmark I gathered from the performance of my passively indexed accounts (wife's IRA, kids 529s, etc). Those have averaged near 15% over the last 7 years.

As I indicated, I am comfortably between 15% and 60%, but it is entirely possible that my rate of return is not sustainable in a market that isn't advancing 15% per year, on average. I am fully aware of that, which is why I want the retirement fully funded before changing to a more conservative strategy. Make hay while the sun shines.

If you read between the lines, and do the math, you could make a pretty good estimation of my, after taxes and fees, combined average return. It's closer to 15% than to 60%, but it exceeds 15% by enough of a margin that it is worth continuing to actively trade.

 

Further on timing, though not really what you were asking.

Success is somewhat related to timing. For example, I was all cash going into election night, and then went in with everything I had on the overnight, post-Trump election, dip. Missed the exact bottom by about 5 points.

Did the same thing with Brexit, and, recently, 2 of the big North Korea threat dips. Also the middle of the night, mysterious oil crash a few months back. Those are just a few timing examples.

Although one of my more successful strategies, timing isn't a huge part of my overall strategy. To do it well requires futures, and I can't trade futures in my 401k, unfortunately.

Futures are a critical part of my strategy due to their improved tax treatment over options and plain shares. Short term cap gains tax is a killer, and is the number one argument for passive index investing IMHO.

I'm a K-1 partner, and our partnership has only "highly compensated" partners and no retirement plan eligible employees. I can max out both my personal and my "employer" contributions. This may be available to 1099 contractors as well, I'm not sure on that.

 

PeriopDoc may be a genius stock/options trader but 7/10 investors/traders lose money over the long run using options/futures. Those aren't good enough odds for me.


10 Reasons Option Traders Lose Money in the Market

 

Let's see how long you keep this going especially during a severe market correction phase . If you can weather the "bear markets" without much loss then the strategy has teeth.

 

This thread is gonna be derailed*

@periopdoc , what gives you your edge over the market?

 

The odds might not even be that good. Most that lose do so because they fail to think through a good options strategy. They just see a stock that they think is going to move and buy options without thinking it through. Just because you know which way a stock is going doesn't mean the option is worth buying. OTOH, if you plan out the trade, use options to amplify your gains and hedge, use stops, and protect gains, they can be an extremely safe strategy. Why wouldn't someone with a big portfolio sell covered premium on at least a portion of it?

There is no "weathering." When the market goes down, I short it, just like I shorted the bear market in oil and gas. I don't care if the market is going up or down, I'm going to make money in it.

If I had to boil it down to two things, it's understanding market bias and understanding options. For example, we are in one of the most bullish presidencies of our lifetime, so as the market goes down, I buy more. As we approach market tops, I sell small chunks to guarantee gains, or sell calls above the calculated top. I rotate my funds into undervalued sectors with an understanding of when the big funds are about to do the same.

I'm always amplifying gains by selling options. Selling expensive options to people who don't understand just how expensive they are it a great way to amplify gains, as long as they are covered in some fashion. If I see an undervalued stock that I want to buy, I sell weekly puts below where I want to buy it. If they are exercised, who cares? I constantly sell weekly premium against held longer term positions.

My sold options typically expire worthless so I'm earning 100% on these small positions. Bigger positions have smaller risk profiles and thus don't pay as well. I reserve a small portion of my gains for trades that either pay extremely well or lose 100%. I win more of these than I lose.

 

Employers can provide a match, but if you are a PP group (not sure if this is done as employee but I think it can be), you can use "profit sharing" and put an extra 36k into the 401k, for a max of $54k into 401k. This is very common do have as a partner in a PP gig.

Also, after 50 yo, you can add an additional 6k contribution (from your pretax earnings), to max at 24k. But, the 35/36k in profit sharing is big. Factor that into things like cash balance (defined benefits) plans, and you can see major pretax savings in PP......