I decided I wanted to buy a Laundromat. I had $50,000 to spend and wanted to ensure it met the following criteria. Firstly, it had to be in good condition, and in a location where it will still be a viable business in 10 years time. Secondly, and more importantly for my objectives, it had to be able to return me a return on investment of 20% per year, over the next 5 years, and require no more than 1 hour of my time a week.
After searching for a while, I found a Laundromat in good condition and in a very nice location for $40,000. The books suggested that it actually made more than 20% per annum, in fact closer to 45%, but at the same time, it involved around 15 hours per week. The owner was providing a laundry service that took her approximately 15 hours a week and she was pretty much running the service, organizing maintenance and emptying the machines of their cash in that 15 hours.
So I looked at it for a while and came up with the following solution. I asked her if she was willing to be my employee, and to basically keep doing what she was doing. She said yes and after negotiating her wage, it turned out that my investment would net me 16% per annum, however my involvement was almost nil. All I had to do was pick up the cash from her each week, and organize maintenance.
To me I had found a good investment. 16% per annum for very little effort is good, but I had to take the situation and tweak it to suit me. If she had said no to my request, and I couldn’t find someone else to do the work, then it would not have been a good investment for me at all, simply because I didn’t have the time, plus I wouldn’t have liked the work involved, it just isn’t me.
This is how you must look at your trading business. Does it suit you? Are you expecting to make large returns per year with little attention? Too many people are getting sucked into promises of big fortunes before looking to themselves and their own needs and current resources to fill those needs.
When I was a student of Peter Bain, I remember him getting a request from someone who had just bought his course. His request was almost a demand, and it was ‘Peter, I need to make around $5,000 a month; I have $10,000 capital and need to be making it in two weeks. Can you help me do that?’ I remember looking through Peter’s sales page after seeing that request, and nowhere does it say that you can generate 50% per month using Peter’s system, nor does it say, in two weeks you’ll be a successful trader. It disturbed me that this was being asked, not too mention how Peter felt.
Peter uses a quote from Albert Einstein that says if you spend 15 minutes a day on a particular topic, in a year’s time you’ll be an expert. Well Peter suggests an hour a day but I’d like to expand on this.
An hour a day does not include your trading time, or the time taken to scan possible trades, or even to analyze the possible trades that have triggered. It is valuable time that you must use to study. Study the course or the system you are looking to trade by way of back testing, understanding the terminology and reviews of your past trades. It also includes time to study the masters of trading. If you want to be a successful trader then there is nothing better than studying the very people who achieve these successes. What makes them tick? I asked Peter as many questions about his day-to-day activities outside of trading as I did on trading itself. Let’s get back to the Laundromat.
You need to be clear on what you can put in to your trading outside of trading itself. Like I said, it’s about study. I could have chosen to do the laundry work my self and made a better return, but it was not what I wanted because I wanted to spend that 15 hours a week doing what I was already doing. Ask your self what you want to be making a year from your trading and then what hours you are prepared to put in a week to achieve this? The higher the return you are seeking the more time you’ll need to put in, it is as simple as that.