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Multiple streams of income

Robert G. Allen 0-471-38180-2 2000

Chapter 1:

  • Table 1.2: a dollar a day grows into $1 million
            at: 	in:
            3% 	        147 years
            5% 	        100 years
            10% 	56 years
            15% 	40 years
            20% 	32 years

Chapter 2:

  • 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
         1. Give
         2. Self
         3. Taxes
         4. Shelter
         5. Household
         6. Auto
         7. Fun & Entertainment
         8. Insurance
         9. Debt/Miscellaneous
        10. Business
  • 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

Chapter 3:

  • 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
      R 	residual
      E 	everybody, everyday: something people read or think they need
      E 	enthusiasm: something you have passion for

Chapter 6:

    "Common Sense on Mutual Funds"
    John C Bogle

    Mary Buffett
  • Quartile Analysis: Morningstar.com (not a free service)
    • Shows ranking of funds among funds of the same category
  • Hulbert Financial Digest
    • www.hulbertdigest.com
    • 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 $5,000"
    • by Michael O'Higgins
    • Using this system with 5 stocks annualized returns of 20.50% from 1973-1999. Dow Jones as a whole returned 14.27%
    • www.dogsofthedow.com
    • System
  1. Buy copy of Wall Street Journal showing closing prices on last business day of year
  2. Gather closing price, yield, execution price, closing price end, dividends, total return (dogs of the dow worksheet)
  3. Rank the yields by circling 10 highest yields
  4. Rank the circled stocks 1 (highest) to 10 (lowest yield)
  5. Identify lowest priced high yields. Put a check mark next to the five circled stocks with the lowest closing prices. Repeat every year.
  • "Beating the Dow with Bonds"
    • Used when stocks are overpriced
    • in past 30 years using O'Higgins' new system
      • DJIA: 13.05% return annualized
      • Beat the dow 5 stocks (see above): 17.69% annualized
      • Beat the dow with bonds: 21.97% annualized
    • system
  1. On Jan 1st buy Barron's Weekly
  2. Find S&P Industrial Index Yield for last week
  3. Locate US Treasury Bond price quotes. Add .30% to the most recent US Treasury bond scheduled to mature in 10 years.
  4. If stock in 2 is higher than bond yield (3) invest in stocks. If not go to step 5.
  5. Find last weeks price of gold per troy ounce. Also find last year's price of gold.
  6. If gold is higher last week invest in T-bonds to mature in 1 year. If gold is lower than last year invest in zero-coupon bonds due to mature in 20+ years.
  • Enhanced Index Funds
    • set a goal of getting returns of more than 100$ 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

Chapter 7

  • 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
    • System
      • Screens:
  1. Screen 1: Select only stocks within 10% of their all time high. They will be in bold type.
  2. Screen 2: Eliminate stocks over $25/share. They are too expensive because we need to buy a minimum of 500 shares
  3. Screen 3: Include only stocks that have an earnings pre share rank of 80+
  • found under Earnings/share
  1. Screen 4: Include only stocks with relative strength figure of 80+
  2. 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.

Chapter 8

  • 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

Chapter 9

  • 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.
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Page last modified on March 30, 2005, at 04:43 AM