Is it unreasonable to double your investment year over year?

Question

I'm making monthly contributions to my self-directed investment account and I'm looking to be aggressive with my investments because I want more than 10-15% returns each year. One of the positions I just purchased and have been building shares in is Sun Edison (SUNE) which analysts have given a one year projection of between $10/share on the low, $15-$19/share on the mean, and $42/share on the high.

My question is, is it unreasonable or unheard of to double or near double your returns each year through aggressively investing in volatile stocks?

Answer 1

Yes, it is unreasonable and unsustainable. We all want returns in excess of 15% but even the best and richest investors do not sustain those kinds of returns. You should not invest more than a fraction of your net worth in individual stocks in any case. You should diversify using index funds or ETFs.

Answer 2

Yes, because you cannot have an exponential growth rate that is faster than the rate at which the economy grows on the long term. 100% growth is much more than the few percent at which the economy grows, so your share in the World economy would approximately double every year. Today the value of all the assets in the World economy is about $200 trillion. If you start with an investment of just $1000 and this doubles every year, then you'll own all the World's assets in 37.5 years, assuming this doesn't grow. You can, of course, take into account that it does grow, this will yield a slightly larger time before you own the entire World.

Answer 3

One thing I like to do every once in a while is look at the day's market movers. It's a list of symbols that had huge movement. There tend to be a couple of 50+% movers every time I look. In fact today I see ATV moved up 414.48%:

So there it is—doubling your investment in one day and then some is technically possible. The problem is that the market movers chart also has an equal number of symbols that had major movements in the other direction. Today's winner is:

SPCB lost 40% in one day, and thats the problem. If you invest in anything that can double your investment in one year, it can also halve your investment in one year. Or do better. Or do worse. You really don't know because the volatility is so high.

Answer 4

"Wealth gained hastily will dwindle but whoever gathers little by little will increase it." Proverbs 13:11 (ESV)

Put another way...

"Easy come, easy go"

You cannot sustain 100% annual ROI. Sooner than you think you will hit a losing streak. Casinos depend on this truth. You may win a few rolls of the dice. But betting your winnings will eventually cause you to lose all.

Answer 5

It is not unheard of. Celebrity investors such as Warren Buffet and Carl Icahn gained notoriety by more than doubling investments some years, with a few very stellar trades and bets.

Doubling, as in a 100% gain, is actually conservative if you want to play that game, as 500%, 1200% and greater gains are possible and were achieved by the two otherwise unrelated people I mentioned. This reality is opposite of the comparably pitiful returns that Warren Buffet teaches baby boomers about, but compounding on 2-5% gains annually is a more likely way to build wealth.

It is unreasonable to say and expect that you will get the outcome of doubling an investment year over year.

Answer 6

Nobody has consistently doubled their investment year after year, not even the "greats" like George Soros and Warren Buffett. Mr. Buffett's average annual returns have been over 20% for over 50 years. That's about twice the American average of 10%-11% a year.

So Mr. Buffett has been "twice as good as average" for his adult life. That's like having a 200 IQ. And in a poll taken in 2000, he was rated the greatest portfolio manager of all time. No lesser person could hope to do better.

What has happened is that people may double their investment in ONE year, then "give some back" the following year. Or else go through several years of "average" 10%-15% returns. The reason is that they will have an investment style that works for one particular market, but not for all markets, so they will have to wait for their "best" market, to have their "best" year.

Answer 7

Yes. The definition of unreasonable shows as "not guided by or based on good sense." 100% years require a high risk. Can your one stock double, or even go up three fold? Sure, but that would likely be a small part of your portfolio. Overall, long term, you are not likely to beat the market by such high numbers.

That said, I had 2 years of returns well over 100%. 1998, and 1999. The S&P was up 26.7% and 19.5%, and I was very leverage in high tech stock options. As others mentioned, leverage was key. (Mark used the term 'gearing' which I think is leverage). When 2000 started crashing, I had taken enough off the table to end the year down 12% vs the S&P -10%, but this was down from a near 50% gain in Q1 of that year. As the crash continued, I was no longer leveraged and haven't been since. The last 12 years or so, I've happily lagged the S&P by a few basis points (.04-.02%).

Also note, Buffet has returned an amazing 15.9%/yr on average for the last 30 years (vs the S&P 11.4%). 16% is far from 100%. The last 10 year, however, his return was a modest 8.6%, just .1% above the S&P.

Answer 8

Not at all impossible.
What you need is Fundamental Analysis and Relationship with your investment.
If you are just buying shares - not sure you can have those.

I will provide examples from my personal experience:

My mother has barely high school education. When she saw house and land prices in Bulgaria, she thought it's impossibly cheap. We lived on rent in Israel, our horrible apartment was worth $1M and it was horrible. We could never imagine buying it because we were middle class at best. My mother insisted that we all sell whatever we have and buy land and houses in Bulgaria. One house, for example, went from $20k to EUR150k between 2001 and 2007.
But we knew Bulgaria, we knew how to buy, we knew lawyers, we knew builders.

The company I currently work for. When I joined, share prices were around 240 (2006). They are now (2015) at 1500. I didn't buy because I was repaying mortgage (at 5%). I am very sorry I didn't. Everybody knew 240 is not a real share price for our company - an established (+30 years) software company with piles of cash. We were not a hot startup, outsiders didn't invest. Many developers and finance people WHO WORK IN THE COMPANY made a fortune.
Again: relationship, knowledge!

I bought a house in the UK in 2012 - everyone knew house prices were about to go up. I was lucky I had a friend who was a surveyor, he told me: "buy now or lose money". I bought a little house for 200k, it is now worth 260k. Not double, but pretty good money!

My point is: take your investment personally. Don't just dump money into something. Once you are an insider, your risk will be almost mitigated and you could buy where you see an opportunity and sell when you feel you are near the maximal real worth of your investment.
It's not hard to analyse, it's hard to make a commitment.

Answer 9

I know it may not last longer but i was able to 2.5x my wealth over last 2 years.(2016, 2017 cont)

I was successfully able to convert 70k into 452k in 21months. Now at this amount, I am really worried and want to take all the profit. I agree that I have been lucky with these returns but it was not all outright luck.

Now my plan is to take 100k of it and try high risk investments while investing 350k in index funds.