An extra double or decade early

 Todd Tresidder (www.financialmentor.com) talks about investment goals in terms of number of doublings. For e.g. at 8% compounded return, an investment takes 9 years to double. Most professionals start their careers at the age of 25 and retire by 65. Over this 40 year working career, an 8% compounded return provides one with 4.5 doublings.

What does it take to get an extra doubling - retire with 2x the money? What does it take to retire almost a decade early? A stinking 2% extra return per year!

So, how do you get this extra 2% per year. Lets first talk about how not to underperform the ~8% return an index provides over the long term. Here are the don'ts:

• Investing in high expense ratio funds
• Timing the market
• Chasing high performing funds
• Speculating with options
• Sizing too big
• Making behavioral mistakes (FOMO, disposition effect, loss aversion, anchoring etc.)

Now that we have covered how to avoid harm, lets talk about juicing the index returns by 2% per year. The solution is intelligent leverage. To achieve the extra 2% return, you would need a portfolio margin account. Most brokers require a minimum balance of $125k - $150k to qualify for portfolio margin. Assuming you have it, the next step is systematically harvesting premium by selling deep out of the money options to generate the extra 2% per year. In the next blog, we will go through the set up for position sizing trades, stock selection, strike prices and option duration. In the final blog, we will look at account management focusing on getting out of losing trades when stocks get assigned.