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Dear DDD Wealth Builders:
Exciting news! We have almost 4 years of very accurate Dow Double Diamond
performance data that shows compound annual growth rates of 34%, 52%,
and 86%, for our 2x, 3x, and 5x trading programs respectively.
Now that we have this longer-term track record, I'd
like to suggest that you take a few moments to set a new wealth goal.
Our 4-year returns, which combine hypothetical back-tested and live
trading results, should be a more accurate indicator of what we can
expect going forward, since it includes both good and poor performance
under a variety of market conditions.
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Follow this procedure to determine your DDD wealth potential
by Dick Sanders
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April 2006
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To make setting your new goal really easy, I've
included compound annual growth tables for 30%, 50%, and 80% (just
under our 4-year performance to allow for trading fees and slippage).
In the tables below, you'll see what various investments grow to in 5,
7, 10, and 12 years at these annual growth rates. But before we get to
that, let's briefly review the unique DDD wealth-building protocol:
1. Set a wealth goal and a date for attaining it.
2. Determine the compound annual growth rate you'll need to attain your goal on time.
3. Allocate among the 2x, 3x, and 5x DDD investments to target your growth rate.
4. Monitor your progress and annually adjust your allocations to stay on track for success.
The big advantage here, of course, is that the DDD
plan lets you set a wealth goal and an attainment date, and also gives
you a way to adjust your wealth-building speed so you'll have the best
possible chance of reaching your goal on time. As far as we know, this DDD benefit is unique in the financial arena today.
Now, if you've been with us for a while and have
been reading the monthly wealth-building articles, you already know how
to plan your future wealth using this protocol and can jump ahead to
"Setting your new wealth goal." If you're new, however, or just haven't
got around to setting your goal yet, let me show you how it's done.
Just remember that past DDD performance is not a guarantee of
your future returns, that there is risk of loss in all stock market
trading, and that the short-term risk of loss increases with leverage.
You can trade the Dow Diamonds (symbol DIA) at your
favorite brokerage firm on full margin and get a 2:1 return on your
investment. Our 4-year performance shows 34% annually at 2x. You can
also trade the Dow Diamond single stock futures and get a 5:1 return.
Our 4-year performance shows 86% annually at 5x. But what if the growth
rate you need to attain your goal on time is between 34% and 86%? No
problem: simply allocate one portion of your investment capital to the
2x investment and another to the 5x investment (see guidelines on 5x
trading further ahead). After that, you can make annual adjustments in
your allocations, as needed, to stay on track for success.
Make it easy on yourself with auto-trading
The simplest way to follow the DDD plan, as
well as the easiest way to make an allocation plan that will target
your growth rate, is to use an auto-trading broker who offers 2x, 3x,
and 5x DDD trading for both regular and tax-deferred IRA
accounts (send us an email and we will provide the name of one). Keep
in mind, if you use your IRA, you'll get the full advantage (and
miracle) of compounded growth and won't be burdened by income taxes
until you start taking withdrawals.
The neat thing about these auto-trading services is
that you don't have to keep up with Jim's daily e-mail briefings. You
don't have to watch the market. And you don't have to worry about
making the trades on time. Your broker will do all that for you. You do
have to set a goal and a date for attaining it, plus determine the
growth rate you'll need to reach your goal on time. But once you know
those things, you can instruct your broker to allocate your funds to
their 2x, 3x, and 5x DDD programs to target the rate you need
to succeed. Just remember, in the course of trading you will have both
gains and losses, and your results will vary from year to year. It's
important that you monitor your results and periodically reallocate
among the various leveraged programs to stay on track for success.
Again, that's the DDD protocol.
Setting your new wealth goal
Again, past performance is not a guarantee of future
returns, but it can be a useful guide for setting wealth goals,
especially when we intend to monitor our progress and periodically
adjust our allocation plans. This is a unique benefit of the DDD
wealth-building program, and one that gives us confidence that we can
actually attain our wealth goals on schedule, or pretty close to it.
Now, to set your new wealth goal using the compound
annual growth tables below, simply locate your investment amount in the
left-hand column, then follow across horizontally to see what it can
grow to in 5, 7, 10, and 12 years. If necessary, you can add two
figures in the left column (such as $10,000 and $25,000 to get
$35,000), as long as you also add the two corresponding future values.
You can also multiply any investment amount by a given factor, as long
as you multiply the future values by that same factor. That way, you
can determine the future values of any investment at these rates. Let's
look at the tables, and then I'll give you a couple of wealth-building
examples.
2x trading targeting 30% compound annual growth:
$10,000 investment: 5 yrs $37,129; 7 yrs $62,748; 10 yrs $137,858; 12 yrs $232,980
$25,000 investment: 5 yrs $92,823; 7 yrs $156,871; 10 yrs $344,646; 12 yrs $582,452
$40,000 investment: 5 yrs $148,517; 7 yrs $250,994; 10 yrs $551,443; 12 yrs $931,923
$65,000 investment: 5 yrs $241,340; 7 yrs $407,865; 10 yrs $896,080; 12 yrs $1,514,375
3x trading targeting 50% compound annual growth:
$10,000 Investment: 5 yrs $75,937; 7 yrs $170,859; 10 yrs $576,650; 12 yrs $1,297,463
$25,000 investment: 5 yrs $189,843; 7 yrs $427,148; 10 yrs $1,441,625; 12 yrs $3,243,658
$40,000 investment: 5 yrs $303,750; 7 yrs $683,437; 10 yrs $2,306,601; 12 yrs $5,189,853
$65,000 investment: 5 yrs $493,593; 7 yrs $1,110,585; 10 yrs $3,748,277; 12 yrs $8,433,511
5x trading targeting 80% compound annual growth:
$10,000 Investment: 5 yrs $188,956; 7 yrs $612,220; 10 yrs $3,570,467; 12 yrs $11,568,313
$25,000 Investment: 5 yrs $472,392; 7 yrs $1,530,550; 10 yrs $8,926,168; 12 yrs $28,920,784
$40,000 Investment: 5 yrs $755,827; 7 yrs $2,448,880; 10 yrs $14,281,868; 12 yrs $46,273,255
$65,000 Investment: 5 yrs $1,228,219; 7 yrs $3,979,430; 10 yrs $23,208,036; 12 yrs $75,194,039
Now, so you'll be clear on how these compounding
tables work, let me give you a couple of examples using a tax-deferred
IRA account. Let's say you want $1.4 million in 10 years and you have
$25,000 today. Scan the tables. Note you can get $1.4 million in 10
years if you earn 50% compounded annually. For this goal, you'll be
targeting 50% annual growth, so allocate 100% to the 3x program.
Let's say you want $1.3 million in 7 years and you
have $50,000 today. Note that in the 50% table the 7-year value for
$40,000 is $683,437. Now jump to the 80% table. Note the 7-year value
for $10,000 is $612,220. When you add the future values for these
$10,000 and $40,000 investments ($50,000 total), you'll have your $1.3
million. For this goal you'll be targeting about 60% annually, so
allocate 80% to 3x program and 20% to the 5x program.
Let's do one more. Let's say you want $10 million in
10 years and you have $85,000 today. Check the future values for
various investments at the three rates. Note that if you put $65,000 in
the 3x program and attain 50% compounded annually, your investment will
grow to $3.7 million in 10 years. There's no listing for $20,000, but
you can double the future values for $10,000 and get the correct
result. And thus if you put $20,000 in the 5x program and attain 80%
compounded annually, your investment will grow to about $7 million in
10 years. Add those two future values together and you'll have over $10
million. For this goal you'll be targeting about 62% annually, so
allocate 75% to the 3x program and 25% to the 5x program.
Please note that these compounded growth tables deal
only with lump sum investments, and more than likely you'll be
periodically adding more money to your IRA or other investment
accounts, so your future wealth should be even higher. By the way, you
can calculate the future value of any size investment on a hand
calculator. For 30% compound annual growth, multiply by 1.30 for as
many years as you intend to build wealth. For 50% compound annual
growth, multiply by 1.50 for each year. And for 80% compound annual
growth, multiply by 1.80. And remember, you're not locked in to these
rates. With a custom allocation plan, you can target any rate between
about 30% and 80%. Now, let me answer a couple of really important
questions...
If the biggest gains are made with the 5x program, why not just put all your money there?
The reason is simple. 5x leverage cuts both ways:
both your gains and losses will be multiplied by a factor of 5. And
although over time the greatest gains will most likely be achieved by
the 5x program (as our 4-year results show) you'll have to ask yourself
if you can stomach the emotional rollercoaster ride that comes with 5x
investing. A few losing trades in a row can bring a 7% or 8% loss on a
cash basis, and that becomes a 35% to 40% drawdown at 5x leverage. Many
people become nervous wrecks with a drawdown that large and quit before
their accounts have a chance to rebound and potentially set new highs.
Many years of back testing and live trading show that the DDD
plan periodically goes through a rough patch during which it has more
losing trades than winning trades. In spite of this, it shows excellent
long-term results, and thus anyone who perseveres is likely to do very
well, and even better at the higher leverages. The important thing to
grasp is that there will be winning trades and losing trades, and the
losing periods can be emotionally very difficult to deal with,
especially at high leverage. Therefore, unless you have nerves of steel
Jim recommends that you allocate no more than one-third of your capital
to the 5x program.
Why is setting a wealth goal and a date for attaining it important?
There are actually 3 very good reasons. First, you can't know how to use the DDD
plan until you have a goal and a date. Those two things determine the
growth rate you'll need to succeed. And your target growth rate
determines how you'll allocate to the 2x, 3x, and 5x investments.
Second, unless you have a target growth rate, you
can't measure your progress. Your growth rate is your benchmark. If you
find you're off the mark, you'll need to make adjustments in your
allocation plan to get a higher or lower rate. That's how you'll stay
on track to reach your goal on time.
Third, having a goal, an attainment date, a target
growth rate and an adjustable allocation plan to stay on track for
success will give you "peace of mind." Basically, you know that you are
in control. And unlike most investors whose financial futures are a
crapshoot, you can be confident that your plan has the potential to
deliver the money you want on the date you specify, or pretty darn
close to it.
To sum up, Jim and I are very excited about our
4-year performance and the fact that these longer-term results should
be far more accurate for goal-setting purposes. No guarantees, but
should we do as well in the future as we have in the past, the
wealth-building potential is tremendous. So please set a new wealth
goal today, then follow the 4-step DDD wealth-building protocol to give yourself the best chance of getting your wealth on time!
Sincerely,
Dick Sanders
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