The Pareto principle
2015 has been about the Pareto Principle for me. Though contrary to the rule, I’m going to end up on about 70-75% of the prior year but have still benefited from a big reduction in required activity. Perhaps I’ve been a little too lax?
I set out on the year to not spend as much time on markets I knew wouldn’t yield as much, so I actively chose to focus on the big opportunities. This isn’t something I’d generally recommend, because you should take all opportunities you can. Especially if you are starting out, or reaching to higher goals. But I’m now in the fortunate position where I no longer need to jump at every opportunity.
That fact aside, if you are a Bet Angel user, you will know we have introduced a range of new automation features in the last year. For me, this means I have significantly ramped up my automated activity. This is especially handy and recommended. Even if you don’t have a profitable strategy it will teach you SO much about the markets. I don’t count, or post, automated results as this is a different ball game from a lot of material I publish, so I haven’t included it in my annual results.
However, lets revisit why I decided to adopt the pareto principle, it should inspire you a bit.
When I started
When I first discovered Betfair and betting exchanges I figured I may, maybe, have three good years before the opportunity passed, this was a guess (a bad one it turns out). So I went at it hammer and tongs to make the most of the opportunity.
I suggest if you find something that works, then you do also. You never know when the opportunity could be taken away from you, for any number of reasons.
What happened next
What actually happened was that I ended up doing far better than I ever imagined and I’m still here and going as strong as ever. I never really stopped going at it to be honest, but I didn’t need to.
Trading can be fun, sometimes frustrating but has ultimately been very rewarding. But it also takes up a lot of time, it can be consuming if you really go for it. But I did do that consciously as it was ultimately done so that I could be successful enough to give myself choices. So I’ve often reached the point where I feel I should honour that agreement. But it’s been hard to do so…
I’ve been aware over the last few years I could probably ease off without too many problems. I don’t need to earn the same as I have in the past and I don’t need to prove anything. But it’s harder than it seems! When I first started trading on the exchanges it felt like every market was an opportunity, I still suffer from that a bit. But when you know you can get money from a market, you feel an instinct to do it!
How many people get that chance and how many would be desperate to pick up some money for clicking around on a mouse for ten minutes? So that’s been a constant driver. However I’m at the stage now where that is just not as important as it was. Unless Betfair experienced exponential growth, then that was always going to be the case. If you compound your earnings then you end up in the situation where, unless the market also compounds growth, you will catch the market and have more money than you can use in the market. I’m delighted, and frustrated, so say that has happened to me.
What to do with excess capital
With that in mind I’ve also been wise and during the financial crisis in 2008 I put spare capital to use. Thanks to That has now grown into something much bigger than I expected as well. So I need to allocate time to manage that now. It’s all become a bit time consuming and to top that all my kids are now in their teens!
So with that in mind it’s was definitely time to reorg my priorities. I wondered if my P&L would follow the pareto principle? But it seems not. I did some research before taking the plunge.
On the six days I predominately trade, it seems 60% of my profits come from just two of them. Obviously this shifts around depending on the time of the year but I’ve worked out I can gain 20% of my time back while only losing 7% of my profits. So that’s what I did, then extended it a little when I realise just how valuable time is. I rediscovered myself a bit during the year and lost nearly two stone in weight simply because I enjoy sport and a bit of exercise. After fifteen years of being sat on my butt, I found great pleasure it heading out on my mountain bike and crashing randomly at new places within 30 miles or so of the office! I’ve been helped by my eldest daughter turning 18.
But doing this is somewhat driven by a desire to fulfil my promise of a few years ago, but also to add some balance, get a bit fitter, enjoy live a bit more and also give myself time to move to the next leg up….
Hello 2016….
Category: General
