Friday, July 23, 2010
Is This What You Need?
Over the years as I was searching for the right system for me (and hopefully you), I developed the following list of twelve requirements to develop a successful investment system that would allow me to achieve financial freedom and retire on my terms.
So check this investment system out and let me know if it will meet your needs?
The system shall...
1. Produce positive returns every year
I don’t like losing money. Who does? If you invest directly in stocks or mutual funds your portfolio will have up years and down years as the market fluctuates through bull markets and recessions. In order to build wealth through compounding you cannot have losing years.
2. Generate income monthly in order to utilize the power of compounding
Monthly income allows us to reinvest our profits to grow our capital faster! Earning 2% each month and reinvesting it monthly has a compounded return of 26.8% instead of 24% annually. Now that doesn’t sound like much but over 5 years your monthly compounding return is 228%! Compare that to a buy and hold strategy which would return 120% over the same 5 year period.
3. Consistently produce 20%+ annual returns
When reinvested this allows our money to double every 2 to 4 years which builds incredible wealth over a relatively short period of time. For example, if you start with $20,000 to invest compounded monthly at a 20% rate in 14 years you will have amassed $321,390. At which point you could earn a nice living still implementing this system and making 2-3% a month, in this case earning 2% each month from your capital would produce $64,277 a year. If you did a little better and averaged 23% a year, after 14 years you would have $485,540, which could generate $111,674 a year from earning 2% each month without being reinvested to retire on.
4. Give you control over your investment
Traditional investing of buying and holding stock affords you very little control of your investments, as you are left to the up and down whims of the market. You also have no idea how much money you are going to make (or lose) and when you will realize that profit or loss. With the Option Income System before you enter a trade you know how much money you are going to make, when you will make it, and the probability of your success!
5. Not take more than a few hours per month to perform
Once you have developed your prospect list you only need to spend a few hours each month to determine the best qualified candidate for your trade. After the third Friday of the month (options expiration day) you simply repeat the process to generate income for the next month.
6. Not require constant monitoring
After my order has been executed I like to take a few minutes each evening to check on the status of my trade. However, if you wanted to take a one week Caribbean cruise with no internet access you could do so without any problem.
7. Trade only high quality fundamentally sound companies or strong sector ETF’s as the underlying asset
This system not only works with stocks of great, fundamentally sound companies, but it should only be performed with the best, most fundamentally sound companies or ETF’s that you would be willing and interested in purchasing! Unlike other books that contain selling put strategies I actually show you how to determine and find these strong performers.
8. Put time decay value on your side
We must have time working for us and not against us. As the seller of the option, your probability of success increases each day as you move closer to the options expiration date due to the time decay value of options.
9. Have a 70%+ statistical success rate for each trade using mathematical probability models before entering the trade
You only enter a trade when you have a minimum of 70% chance of success at the beginning of the option month. Sometimes you start with even a higher success rate -- upwards of 80%. With each passing day your probability of success rate increases due to time decay of the option.
10. Have less exposure to market risk than traditional buy and sell stock for capital gain investment methods
Due to the thorough qualification process of what, when and how you sell cash-secured Puts you rarely have your options exercised requiring you to buy stock, (on average two times a year) so you are technically at most only in the market a total of 8-10 weeks a year. Being out of the market most of the year greatly reduces your exposure to the nasty down swings that can wipe out large portions of your portfolios worth. Granted you don’t participate in the upswings either, but year-after-year you consistently generate income that produces positive returns in up, down or sideways markets!
11. Be simple enough to be learned by anyone with a basic understanding of stock options
The option income system is really quite simple. Monthly income is generated by selling stock options on the strongest companies when we meet our risk to reward and success rate rules. In this book we go over the mechanics of selling a Put option, but do not cover the fundamentals of how stock options work. There are many excellent books that cover this topic that you can study.
12. Be repeatable, others can learn this system and produce the same results This is the acid test that determines if it’s really a system. My hope is that others can learn my system and profit as I have from its success. Doing so will validate that what I have created is much more than an investment philosophy or trading strategy; but a system that others can repeat and produce consistently to benefit their families and their retirement.
Does this sounds like an investing system that you would like to pursue? If so, dig in and read the 'Getting Started' page to learn more!