Purpose of this post
I wrote a related article four years ago: “An investor success can be sustained or not? how to verify?“, which aroused responses from some friends. Today’s post will further detail my views.
This article is the self-examination checklist items I have listed. I hope investors will ask themselves and be honest with themselves. This article is intended to help investors self-examine whether their return on investment is good or not.
Checklist
What is the annualized rate of return (aka IRR)?
This item is the most important, extremely important. Please refer to my post of “Querier to Annualized rate of return for S&P 500 Index” for instructions. Click Querier to Annualized rate of return for S&P 500 Index now and spend one minute filling in three numbers to calculate your own The annualized rate of return on investment.
What if you still don’t know what annualized rate of return is? Or you don’t know the annualized rate of return on your investment. Then you have big problems and the prospects are not good; if you say that your investment is successful, no one will believe it.
How to judge performance based on IRR?
Please note: What I am talking about below is an investment career of more than 20 years, preferably more than 30 years. The investment capital is quite large. And it is the annualized rate of return over the “entire investment career”, not last year or the year before, not those lucky years, and certainly not the best year.
- If your annualized rate of return (aka IRR) is below 10%, we recommend that you invest directly in an ETF that tracks the S&P 500 index.
- If your annualized rate of return (aka IRR) is above 15%, you should be happy with yourself and it is indeed worth being proud of. The reason is simple. If you can maintain such results for many years, your assets will double every five years. Isn’t this something to celebrate? Among investors, you are already a leader and it is no problem for you to beat 99% of them.
- There are very few investors who can maintain an annualized rate of return (aka IRR) of more than 18% throughout their “entire investment career”. At least the ones I know or have read about are considered very successful investors. I believe you have found your own investment direction. No matter what others say, what you should do is to continue on your own way.
- Investors who can maintain an annualized rate of return (aka IRR) more than 20% throughout their “entire investment career” are extremely “rare”. I don’t know anyone “in person”. If you know an investor with such achievements, you should seize the opportunity and listen more to their investment philosophy, which will definitely benefit you a lot.
Buffett’s annualized rate of return (aka IRR) over his entire 59-year investment career from 1965 to 2023 is 19.8%.
How long is your investment career?
If it is less than ten years, it is both a cause for joy and a cause for worry. Most investors with less than ten years of experience have not yet experienced the shock of a 40% stock market crash.
You can be said to be just like newborn calves, and your performance is still uncertain. The upside is that you still have a lot of room for growth or improvement, and still many decads to accumulate wealth, which is enviable.
Keep in mind that investing is a marathon, not a 100-meter sprint.
How does yours compare to the market?
If you invest in U.S. stocks, compare your performance with the S&P 500 index, which represents the broader U.S. stock market. If it performs worse than the S&P 500 index all year round, I advise you to buy an ETF that tracks the S&P 500 index instead.
How many years did you lose money?
If you are constantly losing money, and the number of years you have lost money is greater than the number of years the S&P 500 has had negative returns, then I suggest you stop struggling: buy an ETF that tracks the S&P 500 instead, or just throw your money away. Put the money in a bank deposit, or even withdraw it and put it under your bed, at least you can have some peace of mind.
You may argue: It’s true that I lose money from time to time, but how do you know that I make a lot of money in some years? If so, I still make money on average? My opinion is that the chances of this happening are very very small, about the same as the chances of you winning by rolling the dice in a casino.
How big is your fund size?
Is the more funds the better return rate? Buffett said: “I think I could make you 50% a year on $1 million. No, I know I could. I guarantee that.”
The size of your capital will certainly affect your rate of return on investment. This sentence of mine has many implications: How much capital is considered large? Why does it affect?
It is difficult for ordinary people to understand why too much capital will have an impact on the rate of return on investment. For more details, please see my two posts:
- “The larger the portfolio, the lower the return on investment will possibly be over decads“
- “The correlation between fund size and return on investment“
How much money do you bet on investing?
I often hear that someone’s aunt, classmate, friend, or investment consultant, internet celebrity, has a stonishing performance in stock investment, often makes a lot of money, and the stocks they choose can earn dozens of percentages or several times.
At this point, you should read out the checklist items in this article one by one and check them out. I guarantee that the person who tells you these things will answer, “I don’t know, I’m not sure, they just make big money, why bother with these details.”
Finally, you need to ask a counter-question: “What percentage of his total assets does that person bet on stock investments?” If the answer is: I don’t know, not sure, or 1%, 5%, or 10%.
Why not the number is 50%, 75%, or 90%?
Do you think such investment performance woth your notice? Since the rate of return on investment is said to be so great and there has almost never lose money, he should bet most of his fortune on such a magical money-making machine, right?
For a playful purpose, the return on investment of a very small amount of money, even if the return rate is hundreds or tens of thousands of times; basically has no reference value.
Is there an element of luck?
I have a post of: “How big a factor does luck play in investment success?“
Ask yourself: How much time did you spend studying the financial statements of those investments that made you a lot of money? Why did you buy them? How long do you hold it? Did you earn more than ten times? Are you confident that you can replicate this successful experience?
If all the above questions are negative, it only proves that you are very lucky.
Learn from top investors
When you see investment gurus have been doing great, you should learn from them! “The main investment principles of successful investors are similar“
“Imitating great investors is the fastest and most effective way” We recommend that you always refer to the performance of a few top investors who have been recognized in investment history and how they did it.
Look at the performance of top investors, the same is true for promising ones. For more details, please refer to my post of: “The career annualized return on investment of top investment masters“
Doing this will definitely be helpful to you. Don’t follow internet celebrities, listen less to the nonsense of financial experts, watch less financial programs on TV, don’t believe in open cards, and don’t listen to celebrities bragging about their investment performance.
You should spend your time on the financial reports of the companies, tracking the financial reports and business operations of the companies you invest in; spend more time studying why some companies or investors are successful, but most companies and investors are not.
Closing words
Think independently and don’t follow the crowd.
In Buffett’s 1961 letter to shareholders, he mentioned: “You will not be right simply because a large number of people momentarily agree with you. You will not be right simply because important people agree with you.” and Buffett stated that “You will be right, over the course of many transactions, if your hypotheses are correct, your facts are correct, and your reasoning is correct. True conservatism is only possible through knowledge and reason.” In the investment world, things that make you comfortable are rarely profitable.

Related articles
- “Checklist to see if your return on investment is good or not?“
- “An investor success can be sustained or not? how to verify?“
- “How big a factor does luck play in investment success?“
- “The main investment principles of successful investors are similar“
- “Imitating great investors is the fastest and most effective way“
- “How to research successful investment masters?“
- “The correlation between fund size and return on investment“
- “The larger the portfolio, the lower the return on investment will possibly be over decads“
- “The career annualized return on investment of top investment masters“
- “Why Buffett deserves further study“
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