Sunday, October 20, 2019

Comparing Apples to Apples

     This post is a continuation of the $50 a month stock challenge I started October 14, 2019.  Click on, "No Commission Stock Trades", on the right side of the page to read from the start. 

8:40am (CDT)
      The old saying, "apples to apples" means comparing "things that are alike" and "apples to oranges" means comparing "different things" and different things are not really comparable.
     Comparing your stock market account to mine is comparing "apples to oranges". Even comparing my account one month to the next is comparing "apples to oranges".
     The "apples to oranges" simply means the amount of our accounts have different balances.
     I have a millionaire friend (I am FAR from that) and when we talk about our account loses and gains, we compare that "apples to apples" by using percentages.
     Making $25 with a  $50 account would be difficult as it represents a 50% increase but making $25 with a $1000 account is just 2.5%.
     That is why using percentages is a true indicator of how you are doing. There are two percentages to consider. Invested money percentages (uninvested money makes no money) and account percentages.

     1. Invested money, ROI (Return on Investment) is profit divided by investment.
         This is how each stock trade performed for you.
     2. Account percentages is profits divided by total account balance (both invested money and uninvested money). This is the true measure of your account performance.

     In my $50 a month challenge , I hope to make 2% a month on average for a VERY respectable 24% yearly return. Since each month will start with a different amount (adding $50+profits from previous month), it is that amount I need the 2% monthly gain.
     I am not talking about paper money profits or unrealized gains, there is not real profit or loss on any stock you own until it is sold.


1 comment:

Anonymous said...

I never thought of it those terms, thank you.


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