"I'm a passive investor with what I'd consider a well-managed margin account that will allow me to retire comfortably at 65 with no other deposits into it."
The forbidden fruit for so many mortals.
But people have a weird way to live life, always wanting more, especially in first world nations. Which is good. It's what has allowed humanity to make so much progress with inventions like Electricity, Cars, the Air conditioner,...Condoms. So, Andrew naturally wants more:
"I've been trying to find the answer to my two main concerns. How much of an ROI can I expect to make with low-risk trades within a year? If it's below 8% I'd consider myself safer sticking with passive investing.
My second question is how much time needs to be devoted to successfully trade?"
You honor me too much by sending your concerns over to me. It's me who should probably be sending questions to you. So, humbly, here's what this faulty human believes Andrew:
- Crossing my heart, if you truly have a game plan in place already, a plan that has worked and works for you. A plan that will make full retirement a guarantee at this point. Then my friend, you don't necessarily have to complicate your life with active trading. I hate to say it because I would be losing one reader of this site. But you don't need to actively trade. You are perfectly fine with what you are doing and your game plan already works for you. So, from there on, anything I, or anybody, says to you, is purely optional for you.
- Do not underestimate a consistent 8% annual return. 8% is a good solid return. Now, as a passive investor you will have to stomach 30% - 40% draw-downs from time to time given a long enough time-frame. Passive investing is not all it's cracked up to be. For example what if you suffered a 55% draw-down in 2008 right before your retirement? or what if you suffered a 89% draw-down in your retirement funds right before your retirement, as it happened in 1929? But that being said, you are close anyways and you seem to be well on your way. The stock market on average has returned about 7% annually, so you would be beating the markets with 8%, something which very few people can consistently do including the so called "professionals". So, yes 8% returns per year are a challenge, regardless of the strategy. I personally try to achieve +10% to +30% per year while trying to keep my maximum draw-down below 10%. That's pretty challenging. And I am aware of the added risk I am taking in order to achieve those out-sized returns. That's really what it comes down to. How much are you willing to sacrifice? because additional returns will only come at the expense of additional risks.
- How much time needs to be devoted? well, there are so many different ways to skin a cat aren't there? There are hundreds of trading strategies, each one with a different energy/dedication level required. My options trading style has come to a point where it is very simple and mechanical and I invest less than an hour per week analyzing my positions and next moves. In fact, writing an article on this site takes me longer. Of course, to get to this point I did have to study a lot, years indeed. But as for actual execution right now, seriously, less than an hour per week. I have a full time job, so I cannot be glued to the charts all day, nor do I want to.
Summing up, if you're a wrinkly, close to retirement and with a decent nest egg already invested that will allow you to inevitably fully retire, you don't have to change what you have done so far. I would love to sell you stuff man, but I can't, in good conscience, advise for you to start actively trading.
Of course, knowledge never hurts. Learning how to reduce your cost basis and mitigate risks with basic options strategies like Covered Calls, or some protective insurance Puts to protect your nest egg, that's good, and perhaps something you may want to read up on a little.
Hope this answers your questions.
Have a happy retirement.
Here's a list of related pieces written in the past that complement today's article:
Covered Call vs Buy and Hold
A simple Strategy that beats most traders
Trading with realistic expectations
How much capital do you need to trade for a living
ETF Rotation Systems to beat the markets - Global Equities