Section Items
Short Term Holding
Slightly Off Topic

Share Dealing - Compound Growth

If you have £1,000 and you take 4% profit, how many trades does it take to double your money?

The answer is obviously not 25 (100/4) but it is easy to forget how significant compound growth is.

The table below shows the growth of this pot if each trade yields one of a 4%, a 5% or a 6% profit.

£1,000 Pot Growth

4% Growth5% Growth6% GrowthTrades Count

As you can see it takes 18 trades to double your money with 4% profit and only 12 at 6% profits.

If you could trade at 4% per week after 52 trades your pot would have grown to £7,686.59.

Although this is the sort of wishful thinking that led to people taking out Endowment Mortgages it does illustrate why even being very cautious and taking a 4% profit is worthwhile and also the cost of wasting a week or two waiting for just a bit more profit that never comes.

What we can also see from this table is why £1,000 is not really enough to start with, as the numbers don't include dealing fees.

Typically you will be paying £10 to buy and £10 to sell as well as stamp duty of 0.5%, so half of the profit will go in fees in the early days.