Lenny D. answered • 05/13/19
Former professor at Tufts University with decades on Wall Street
A few things need to be clarified. First, if you are making trading profits yiou only trade abiout 256 days per year. We can make it 365 if you like. . Second, you said AVERAGE 2%. We need to know ho volatile your returns are. Suppose we have 3 Traders, Adam, Bob and Charley. Adam makes 2% day in and day out with no variation. Bob makes 12% half the time and loses 8% half the time. (average - 2.% Charley is a gunslinger. He makes 22% and loses 18%.
The results may Astound You.
for adam in 1 year 500 will be Worth 500*(1+2%)^256 =$79545.20
For Bob it will be worth 500((1+12%)^(256/2)*(1-8%)^(256/2) =23,105.68
Washing machine Charley Has some wild swings. If you invest 500 with him you will have
500*((1.22)^(128)*(.82)^128) = 526.26.
Variance acts as a tax on compounding.. The answer to your question depends on how volatile the returns are. If the standard deviation is above 20% you will go broke eventually. The more above 20% the sooner it will happen.
Hope this Helps
