Multiple streams of income
Robert G. Allen
- Table 1.2: a dollar a day grows into $1 million
3% 147 years
5% 100 years
10% 56 years
15% 40 years
20% 32 years
- Seven Essential Money Skills
1. Value it
2. Control it
3. Save it
4. Invest it
5. Make it
6. Shield it
7. Share it
- Warren Buffet's Two Rules
1. Never Lose Money
2. Never Forget Rule 1
- 10 Ways You Can Spend Money
7. Fun & Entertainment
- Extend Your Planning Horizon
- minimum horizon of 90 days. What can you do today to make something happen in 90 days?
- Plastic Surgery
- Not using credit cards cuts living expenses by an average of 30% over 12 months
- Residual Income:
- Work hard once and unleashes a steady flow of income for months or even years. Get paid more than once for every hour you work. e.g. royalties, investments, rental income, multi-level marketing.
- Linear Income:
- Only get paid once for each hour you work. Typical Job.
- Money Tree Formula
M multiple streams of income
O outstanding: product or service must be outstanding
N nothing down: use little or no money
E employee-resistant: no employees = less risk
Y yield must be high
T trend or timing, go with not against a trend
E everybody, everyday: something people read or think they need
E enthusiasm: something you have passion for
"Common Sense on Mutual Funds"
John C Bogle
- Quartile Analysis: Morningstar.com (not a free service)
- Shows ranking of funds among funds of the same category
- Hulbert Financial Digest
- shows performance of plans in investment newsletter
- tells you which "gurus" plans are making money and which are losing money
- "Beating the Dow: A High Return, Low Risk Method For Investing in the Dow Jones Industrial Stocks with as Little as $5,000"
- by Michael O'Higgins
- Using this system with 5 stocks annualized returns of 20.50% from 1973-1999. Dow Jones as a whole returned 14.27%
- Buy copy of Wall Street Journal showing closing prices on last business day of year
- Gather closing price, yield, execution price, closing price end, dividends, total return (dogs of the dow worksheet)
- Rank the yields by circling 10 highest yields
- Rank the circled stocks 1 (highest) to 10 (lowest yield)
- Identify lowest priced high yields. Put a check mark next to the five circled stocks with the lowest closing prices. Repeat every year.
- "Beating the Dow with Bonds"
- Used when stocks are overpriced
- in past 30 years using O'Higgins' new system
- DJIA: 13.05% return annualized
- Beat the dow 5 stocks (see above): 17.69% annualized
- Beat the dow with bonds: 21.97% annualized
- On Jan 1st buy Barron's Weekly
- Find S&P Industrial Index Yield for last week
- Locate US Treasury Bond price quotes. Add .30% to the most recent US Treasury bond scheduled to mature in 10 years.
- If stock in 2 is higher than bond yield (3) invest in stocks. If not go to step 5.
- Find last weeks price of gold per troy ounce. Also find last year's price of gold.
- If gold is higher last week invest in T-bonds to mature in 1 year. If gold is lower than last year invest in zero-coupon bonds due to mature in 20+ years.
- Enhanced Index Funds
- set a goal of getting returns of more than 100$ of a given index.
- e.g. 160% return of S&P 500
- get returns by buying leveraged options
- more risk than index fund
- can "bet" market will go up or down
- Ultrabull (ulpix) beta=2 twice S&P
- Ultrabear (urpix) beta=-2 twice the loss of the S&P
- Ultra OTC (uopix) beta=2 twice Nasdaq 100
- Covered Call Options
- You own stock (100 stocks=1 contract)
- You sell options to someone else for a premium
- A sell price is set (a strike price) higher than the current rate (call)
- Options expire on the third friday of the month
- The person can either buy the stock, you get the strike price plus the premium, or not buy in which cas you keep the stock and the premium
- If stock goes up you lose what would have been the value of the stock
- If stock goes down you get premium and keep the stock so you have less loss
- Call: a right to buy
- Put: a right to sell
- "The Cooper Covered Call Strategy"
- use "Investor's Business Daily"
- To find which stocks are optionable check www.cboe.com
- Screen 1: Select only stocks within 10% of their all time high. They will be in bold type.
- Screen 2: Eliminate stocks over $25/share. They are too expensive because we need to buy a minimum of 500 shares
- Screen 3: Include only stocks that have an earnings pre share rank of 80+
- found under Earnings/share
- Screen 4: Include only stocks with relative strength figure of 80+
- Screen 5: Include only those stocks with a group strength of A
- Compare charts (from bigcharts.com) of remaining stocks. Look for: most stable (least number of big down dips, most steady upward w/out big spikes)
- To find out what options sell for go to www.cboe.com Find the month closest 30 days from the month in which you are selling the option.
- Look for strike price at or slightly above you current strike price.
- Seller gets the ask price
- Make sure there are at least 50 contracts in the open interest column to ensure a liquid market.
- Average net worth -- from Reader's Digest
- Homeowner: $63,000
- Renter: $1,921
- Bargain Finder Form
- scores property based on investment quality
- you can download it at multiplestreamsofincome.com or my copy here: Bargain Finder Form
- only buy properties that are a 12 or greater
- Tax Lien Certificates
- Offered by counties, other governments
- sell you the right to tax revenues from people who are behind on their property taxes
- intelest rate is set by law, often 15%+
- government collects the taxes and sends the checks to you
- guaranteed by the government. They pay or you have right to property. Of course you have to sue to get it.