Ahead of the start of Q4 2021, EndoTech announces the release of its NEW financial vehicle for retail clients. This category of investment vehicle is called (and later mathematically defined) as Breakthrough Financial Opportunity or BFO.
It is supported by algorithmic trading, portfolio management methodologies, and money management theories. It is a combination of science and cutting-edge technology leading to completely different investment outcomes. Read the article on durable models development and other articles in our blog to find out more.
What is BFO
It is well established that there is no High-return without High-risk. But what needs to be considered is a third leg – High Probability. EndoTech has developed Breakthrough Financial Opportunity through the interplay of these different parameters and by adding the third leg of High probability.
What is High Probability
In the financial industry, the probability is an overall chance for a system to be profitable next year. In every model, every physical event, the professionals know the probability for it to happen.
And the reality is, calculation of probability is not a simple intuitive thing like many naive gamblers think. It is a rigorous science of statistics and time series. This is why we defined BFO as triple HHH.
In the Stocks era, 20% annual profit was considered a dreamy high-risk high-return investment. Imagine having invested $1,000. Then compounding yearly 20% over and over for 10 years. You would end up with $6,192. Or even as little as $3,993 Net after paying 1% Fees and 25% Taxes.
Seems not bad, but it only brings the profit equal to 2.9X Investment.
Obviously, it is not a life-changing event.
Why do other high-return systems fail to offer Breakthrough Financial Opportunity?
The pitfalls of many new-age investment ideas. They are talking either about One-time opportunities, or Quick Wins. All of them usually have High-Return or at least potential high returns. But it’s very hard to quantify probability on one event and not systematic models.
High Opportunity and High Return
High Opportunity is based on the Magic Life-Changing Number. To define it we made a poll asking our clients two questions:
- What is a risk capital you can easily afford to lose?
- What is a life-changing amount of money for you?
Then we calculated :
(2) AVG LIFE-CHANGING AMOUNT / (1) AVG RISK CAPITAL
and the Magic Number came out to be = ~402X.
This is the Breakthrough Financial Opportunity!
Example: investment of $1000 for 10 years, means $1000 X 402 = $402,000 BFO
At that time we were ready to start practicing our HHH.
To get to 402 times of initial risk capital in 10 years, after 20% fees and 25% taxes are paid, one needs to make 137% annually.
And this is the High Opportunity.
High Probability and High Risk
Since we identified High-Opportunity in terms of High-Return, we come back to the other two H: High-Probability and High-Risk.
Risk is identified by how much one can lose during one single year. We apply the rule of thumb, that as long as your risk is less than 50% of your capital, your High-Opportunity goal of 402x is reachable.
But when we applied High-Probability our modes show that unless it is 86%, the system is not reliable enough.
Again, it has nothing to do with single trades but the overall probability to deliver the results during one single year timeframe.
Conclusion: HHH is the Breakthrough Financial Opportunity
EndoTech calculates triple HHH to define High-Opportunity.
EndoTech applies the Magic number to define the growth of the initial risk capital during 10 years.
This is a financially life-changing story for all existing and future EndoTech clients.
