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|Subject: Re: The Net Worth of American Households||Date: 1/7/2007 6:26 PM|
|Author: imdajunkman||Number: 19327 of 35576|
$10k is petty cash, not a portfolio.
Moving up the scale to the SEC-required $25k for a PDT account, it would take a very superior trader to make serious money from such tiny assets. In fact, a superior trader wouldn't even attempt it.
At $100k --the typical minimum for managed money-- proper diversification. can be achieved by even an average investor, but probably not a livable income. (Calculate the rate of return that $100k would have to achieve in order to produce, after taxes, even a modest $25k/year.)
At $250k under management, a net income of $25k becomes feasible, provided that investments with stock-like risks and returns are selected. But there's no way someone who traffics heavily in CD's and TIPS is going to pull down a net, annual $25k on that small of an account. .
At $500k of financial assets under management, you're now talking feasibility with even a conservative, “balanced” fund approach. At net-7% gain, the annual income is $35k, which is a modest, middling income that many people would consider quite adequate. Combine that income stream with a modest pension and some Social Security payments, and the investor has achieved a fairly robust financial structure that could sustain a lot of damage and still meet most foreseeable needs.
The tradeoff between assets under management and desired return is this: the smaller the account size, the greater the management burden, all other things being equal. The greater the account size, the lesser the threat that when bad things happen –-either a large event or many small events-- cannot be recovered from. Size matters. The more money that is being managed, the easier it becomes to reduce risk.
“To get from $10,000 t