SHARPE INCOME … Predictions of Performance Are Insane

Posted on May 25 2015 - 12:40pm by Sharpe Trade

The original Sharpe Income post can be found here.

The Sharpe Income category be found by clicking on that red ‘Sharpe Income’ tag next to this post title, or by clicking here.

We continue the discussion from the last entry.


It just sort of struck me as I was putting this weeks Sharpe Income entry together.  The idea of performance within a given time-frame.

At times, a new trader may have a bit of a good run in their first year.

Well, I made 6% in three months, so that must mean that every three months, I’ll make 6%”.

No.

Wrong.

Do not do that.

There is a reason why every risk disclosure on planet Earth states:  Past performance is no guarantee of future results.

No one can ever predict performance.  To attempt to do so is an exercise in futility.  As my mentor once said years ago …

You never know in what part of the year … you’ll really make your money …

In other words, you can never look at a specific time period, let’s say …. 3 months, and say:  I will make X.Z% in that three months.  It’s what makes investing so difficult for some folks.  Many are used to a 9 to 5 job, where they put in X amount of time, and they know that they will receive Y amount of pay from their employer.  

The markets are absolutely nothing like that.

The first thing you have to learn to let go of, is ‘certainty’.  Humans love certainty.  People crave certainty.  We build our lives, seeking some level of security.  But when dealing with the markets, you must learn to let go of certainty.  There are general principles that keep you safe, and can make you profitable.  But after you have implemented those principles?  You must let go of believing that implementation of those principles will lead to a ‘guarantee’ of a certain level of performance within a given time frame.

As you have no doubt heard here at Sharpe Trade, in my short-term trading, I’m experiencing a bit of draw-down.  That’s ok.  It happens.  In the last several years, I’ve gained over 250%.  So I can undergo a little pain in the form of 11% draw-down.  Last week, the draw-down stopped, finally, in my short-term trading account.  I look forward to greater gains in the long run.  But if we look at the short-term time frame, if you compare my short-term trading to what we have done here with our free Sharpe Income  project   as we mentioned last week, our Sharpe Income Project is actually ‘beating’ my short-term trading!

The Sharpe Report – Last Five Months

05_24_15_SR_Total Portfolio Balance

The Sharpe Income Project – Last Five Months

05_25_15_Sharpe Income Total Nominal Balance

The Sharpe Income Project – Last Five Months

(Obviously Discounting Capital Additions)

05_25_15_Sharpe Income vs Benchmark

Again …  you can never guarantee performance.  You must let go of certainty.  Learn to invest by a set of proven metrics, control and mitigate your risk, and learn to manage the pieces as time goes by.


‘Sharpe Income’ Actions This Week

As you will note in the PDF that is attached below … for the purpose of this project, we now have $264.30 available, that is ‘segmented’ into a few different categories.  Here is what we are concentrating on this week …

Remaining Cash after Reservations: This week, I am contributing the entire $25.00 weekly deposit towards this category.  The prime reason, is that I have the purchase of a stock for this project on my radar.  If an opportunity to add this new position I want to make sure I have the cash to purchase more shares when the time is right .

The link to the Google Drive Spreadsheet that you can view, that we will edit, build upon and refer to over time can be found at this link.

We continue the Sharpe Income project with this next entry.

The Sharpe Income PDF breakdown for Week 26 can be found here …

2 Comments so far. Feel free to join this conversation.

  1. Christopher May 25, 2015 at 1:40 pm - Reply

    Aww… didn’t they let you have the day off Dan 😉

    • Dan Shy May 25, 2015 at 3:15 pm - Reply

      🙂 … I guess … in truth, I’m sort of a work-nut … 🙂 Work hard and play hard. Last night, I think I played a little ‘too’ hard. I was out to like 2:00 AM over a friends house …

Leave A Response