Formula for estimating amount needed to become full-time stock market investor
You can't get there from here.  This isn't the right data.  Consider the following five-year history:  2%, 16%, 32%, 14%, 1%.  That would give a 13% average annual return.  Now compare to -37%, 26%, 15%, 2%, 16%.  That would give a 4% average annual return.   Notice anything about those numbers?  Two of them are in both series.  This isn't an accident.  The first set of five numbers are actual stock market returns from the last five years while the latter five start three years earlier.  The critical thing is that five years of returns aren't enough.  You'd need to know not just how you can handle a bull market but how you do in a bear market as well.  Because there will be bear markets.   Also consider whether average annual returns are what you want.  Consider what actually happens in the second set of numbers:   But if you had had a steady 4% return, you would have had a total return of 21%, not the 8% that would have really happened.  The point being that calculating from averages gives misleading results.  This gets even worse if you remove money from your principal for living expenses every year.   The usual way to compensate for that is to do a 70% stock/30% bond mix (or 75%/25%) with five years of expenses in cash-equivalent savings.  With cash-equivalents, you won't even keep up with inflation.  The stock/bond mix might give you a 7% return after inflation.  So the five years of expenses are more and more problematic as your nest egg shrinks.  It's better to live off the interest if you can.  You don't know how long you'll live or how the market will do.   From there, it's just about how much risk you want to take.  A current nest egg of twenty times expenses might be enough, but thirty times would be better.  Since the 1970s, the stock market hasn't had a long bad patch relative to inflation.  Maybe you could squeak through with ten.  But if the 2020s are like the 1970s, you'd be in trouble.
"A huge amount of money in all financial markets is from institutional investors, such as mutual funds, government pension plans, sovereign wealth funds, etc.  For various reasons these funds do all of their trading at the end of the day.  They care primarily that their end-of-day balances are in line with their targets and are easy to audit and far less about ""timing the market"" for the best possible trades. So, if you're looking at a stock that is owned by many institutional investors -- such as a stock (like AAPL) that makes up a significant portion of an index that many funds track -- there will be a huge amount of activity at this time relative to stocks that are less popular among institutions. Even just in its introduction this paper (PDF) gives a fair overview of other reasons why there's a lot of trading at end-of-day in general. (In fact, because of all this closing activity and the reliance on end-of-day prices as signposts for financial calculations, the end-of-day has for decades been the single most fraud-ridden time of the trading day.  Electronic trading has done away with a lot of the straight-up thievery that floor traders and brokers used to get away with at the expense of the public, but it still exists.  See, for example, any explanation of the term banging the close, or the penalties against 6 banks just last month for manipulating the FX market at the close.)" "As JoeTaxpayer says, there's a lot you can do with just the stock price. Exploring that a bit: Stock prices are a combination of market sentiment and company fundamentals. Options are just a layer on top of that. As such, options are mostly formulaic, which is why you have a hard time finding historical option data -- it's just not that ""interesting"", technically. ""Mostly"" because there are known issues with the assumptions the Black-Scholes formula makes. It's pretty good, and importantly, the market relies on it to determine fair option pricing. Option prices are determined by: Relationship of stock price to strike. Both distance and ""moneyness"". Time to expiration. Dividends. Since dividend payments reduce the intrinsic value of a company, the prospect of dividend payments during the life of a call option depresses the price of the option, as all else equal, without the payments, the stock would be more likely to end up in the money. Reverse the logic for puts. Volatility. Interest rates. But this effect is so tiny, it's safe to ignore. #4, Volatility, is the biggie. Everything else is known. That's why option trading is often considered ""volatility trading"". There are many ways to skin this cat, but the result is that by using quoted historical values for the stock price, and the dividend payments, and if you like, interest rates, you can very closely determine what the price of the option would have been. ""Very closely"" depending on your volatility assumption. You could calculate then-historical volatility for each time period, by figuring the average price swing (in either direction) for say the past year (year before the date in question, so you'd do this each day, walking forward). Read up on it, and try various volatility approaches, and see if your results are within a reasonable range. Re the Black-Scholes formula,  There's a free spreadsheet downloadable from http://optiontradingtips.com. You might find it useful to grab the concept for coding it up yourself. It's VBA, but you can certainly use that info to translate in your language of choice. Or, if you prefer to read Perl, CPAN has a good module, with full source, of course. I find this approach easier than reading a calculus formula, but I'm a better developer than math-geek :)" Does it make sense for stocks to earn a premium indefinitely? Yes. There is good reason to think that the stock market will make money indefinitely: the stock market is the primary mechanism through which investors bear market risk, which requires compensation.  If you think of all the owners of firms (stockholders and bondholders, generally) the risk premium that stocks earn stocks is the way bondholders pay equityholders to bear the risk that they do not wish to. Will stock prices always go up in the long run? As long as companies pay out less in dividends than their profit, prices will go up.  That could change if we were to change our corporate culture and/or tax practices so that firms paid out more in dividends.  However, for the purposes of your question, I think it doesn't matter much whether the investor makes money as dividends or capital gains. Does the 5-7% guess apply only to the US market? I didn't write (nor read) the books in question, but most likely that is a global number.  The US dominates the global equity market, so it's often a good proxy.  However, international returns taken together have no less risk and earn no less over long horizons in general.  The particular examples you have pointed out are special cases that only apply to a part of the global economy and a particular time period.  There are plenty of examples of stock markets and time periods that did much better than the US market to offset your examples. Is 5-7% a reasonable long-term estimate of equity returns? Equity will always earn more in expectation than risk-free securities will.  How much more depends on major economic factors.  5-7% has been a good estimate for the market risk premium for many, many decades (stocks should earn this plus whatever the risk-free rate is).  However, that is just an empirical observation, not a rule.  It can change.  Some day technological progress could slow down or stop, we could run out of important resources in a way that we can't compensate for, our population permanently could stop growing, aliens could invade, etc.  Down the road it is certainly possible for expected equity returns to go down and never go back up again.  This would result from a permanent, global, economic shift that I think would be pretty obvious.  That is, you wouldn't have to look at stock prices to know it was happening. "But I don't see how it's any different than buying a stock at a low price and holding on to it for some months. Based on your question, I would say the difference is time. Day trading by its nature is a 6-hour endeavor. If you buy low and are planning to sell high, then you only have a few hours to make this happen. As a previous poster mentioned, there is a lot of ""white noise"" that occurs on a weekly/daily/hourly/min basis. Long-term investors have the time to wait it out. Although, as a side note, if you were a buy-and-hold investor from the 1960s-early 1980s, then buy and hold was not very good. Is it just the psychological/addictive aspect of it? This is the biggest reason. Day trading is stressful and stress can cause financially destructive decisions such as over-leveraging, over-trading, etc. Why is day trading stressful? Because you are managing hundreds to thousands of trades a year. When combined with the lack of time in a day to make moves, it becomes stressful. Also, many day traders do it full time. Which adds to the pressure to be correct and to be incredible at money managment. A lot of buy-and-hold investors have full time jobs and may only check their positions every month or so." For your purposes, I would recommend using direct investment in a no-load mutual fund.  I mostly use Vanguard and would recommend them.  They just about invented index funds, usually have the lowest (internal) expenses for index and many other funds, if you take electronic instead of paper statements there is no maintenance fee, have no transaction commission, can do periodic automatic investment from a bank account etc.  A typical index fund there would require an initial $3000 investment and would have a minimum of $100 for each additional investment.  If you can't come up with an initial sum of that size, you might be able to find a broker with a lower minimum and suitable free ETFs trades as others have suggested. "Everything you are doing is fine. Here are a few practical notes in performing this analysis: Find all the primary filing information on EDGAR. For NYSE:MEI, you can use https://www.sec.gov/cgi-bin/browse-edgar?action=getcompany&CIK=0000065270&type=10-K&dateb=&owner=exclude&count=40 This is the original 10-K. To evaluate earnings growth you need per share earnings for the past three years and 10,11,12 years ago. You do NOT need diluted earnings (because in the long term share dilution comes out anyway, just like ""normalized"" earnings). The formula is avg(Y_-1+Y_-2+Y_-3) / is avg(Y_-10+Y_-11+Y_-12) Be careful with the pricing rules you are using, the asset one gets complicated. I recommend NOT using the pricing rules #6 and #7 to select the stock. Instead you can use them to set a maximum price for the stock and then you can compare the current price to your maximum price. I am also working to understand these rules and have cited Graham's rules into a checklist and worksheet to find all companies that meet his criteria. Basically my goal is to bottom feed the deals that Warren Buffett is not interested in. If you are interested to invest time into this project, please see https://docs.google.com/document/d/1vuFmoJDktMYtS64od2HUTV9I351AxvhyjAaC0N3TXrA" Another one I have seen mentioned used is Equity Feed. It had varies levels of the software depending on the markets you want and can provide level 2 quotes if select that option. http://stockcharts.com/ is also a great tool I see mentioned with lots of free stuff. Over the long run, you can expect to do about as well as the market itself. Depending on what time period you view, the stock market has typically provided returns of approximately 10%. Some years it is up, some years it is down. You may think you can get better returns, but you are mistaken. You may be able to do better over a short time period if you take on vastly more risk, but you won't be able to do so long term. In order to make $2000/month, then, you will need approximately $240,000 to invest. And even then, you won't make that kind of return reliably. Some months, some years, you'll make more. Other times, you'll lose money. If anyone tells you they can double your money in a month (which is what you are hoping for), walk away. Because it is either illegal or a scam. The only way your plan can work is if you are reliably able to predict stocks which will go up by 10% in the next two days. You cannot do this. You can't even predict which stocks will go up by 10% in the next year.