Defensive Investing School

I recently wrote an article titled defensive investing where I outlined the basics of defensive investing. This article goes more in depth. I’m going to list the defensive and offensive strategies with investing below and then list applicable examples.

Defensive strategies

  • Cash and bonds
  • Index Funds
  • Large Cap Stocks
  • Leverage products to the upside
  • Long call options/Options to the upside
  • Buying 25 to 75% off the all time high
  • Diversified portfolio
  • Dollar cost averaging

Offensive Strategies

  • Call opinions to the upside with a short expiration date
  • Leveraged Products to the downside
  • Put options/Options to the downside
  • Concentrated portfolio
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What is a successful option trade?

Trading options is like fishing. You use your bait in order to catch a fish. Once you catch a fish you have to reel it in. The worse thing that can happen is your fish gets away with your bait. One of the best ways to prevent this from happening is by having a stop loss order. Once you’re positive in your option trade make sure to lock in profits. You must know your entries and your exits and your stop loss is one of your exits.

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How to Make $10K a month

If I won the lottery, received an inheritance or became a crypto millionaire overnight, I would put that money into 3 places. Rents, dividends & interest and appreciation. 300K a piece and then spend the last 100K. So that’s 300K to rent, 300K to dividend and interest and 300K to appreciation and then spend 100K on an enjoyable liability like a vacation, car, down payment on a house et cetera.

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Defensive Investing

I recently wrote a post titled Rule # 1 of investing. The # 1 rule is to never lose money and you accomplish this by investing in assets that have a low probability of losing money. You have to focus on defense first. This can only be done by knowing where the safe investments are. The safe investments have consistent upside potential with limited drawdowns. They are index funds. Total stock market index funds and S&P 500 funds. Some individual stocks like apple and other large cap tech stocks may also fit the bill if you have a higher risk appetite. For example, apple is the main company that is holding up the tech sector by its boot straps. That’s why it’s the #1 holding of VTI, VOO and QQQ. It’s because of the limited drawdowns and high upside potential.

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How To Use Leverage

I am a huge fan of Robert Kiyosaki’s cash flow board and online game. The cashflow game is a wonderful way to learn about investing and cash flow. Realestate investments adds to the income portion of your financial statement by increasing your cashflow. Stocks does not, unless you are receiving dividends, but the dividends from stocks is miniscule compared to passive income from real estate. Stocks are a good tool to leverage into realestate, especially while you are looking and waiting for good realestate deal. It makes it easier to build capital, though it takes time.

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How to become a millionaire with $100 a day

How many different ways can you make at least $100 a day? Making $100 a day on average is making about $3000 a month. In order to make $3000 a month you have to make about $20 an hour. You can make $100 a day/$3000 a month day trading, selling covered calls, working a nine to five or collecting dividend payments from stocks. The best thing is that you can even achieve all of these $100 a day payments in the same day making $400 a day. Now this is easier said than done and I will go over exactly what each of these $100 a day tasks would look like, and if done over 10 years would yield over 1 million dollars.

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It’s Nothing But a Nest Egg

Life is about relationships and time. Time is how we grow and cherish those relationships. Whether it’s our relationship with God, family or friends at the end of it all this is what matters in life. It’s not our career, money or fame. This begs the question how can we get more time to spend with the people that’s important to us when there are only 24 hours in a day. Well the only way to get it back it to buy it back. This is done by spending less time working and trading time for money. There are multiple ways to approach this. You can shoot for complete financial independence and save 25 times your yearly expenses which can seem like a daunting pursuit, but it can be done with tremendous discipline and sacrifice, or you could grow your nest egg slowly and use it as a store of value.

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Where Index funds belong in your portfolio

The core of your portfolio should be a total stock market index fund or S&P 500 fund. This fund is relatively stable and won’t drop as much as some individual stocks. You could include utility stocks and communications stocks in this category as well, but these large cap index funds are composed mostly of large cap growth and value stocks with blue chip stocks contributing as well. These index funds should compose 25 to 75% of your portfolio. This means if your portfolio is composed of over 75% index funds then your portfolio may be too conservative and if your portfolio is composed of over 75% individual stocks and under 25% index funds then your portfolio may be too aggressive. Your risk tolerance of course plays a big factor in your asset allocation. My brother for instance has his portfolio in 100% individual stocks and that fits his risk tolerance. I myself like to stay within the ranges mentioned above and I’m currently in a 50/50 Stock/Index fund mix.

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Rule # 1 of Investing Debunked

Investing is not just about making money. It’s about making more money than you lose. One of Warren Buffet’s famous quote is about rule #1 of investing which states never lose money. This is true under certain conditions and investing strategies, but every one knows that if you invest in 10 individual stocks, 5 may be winners and 5 of them may be losers and in that case you may want to cut your losers short and let the winners ride; but notice that if you cut the losers short then you will have losses. If you’re an option or day trader it’s the same and if you’re a buy and hold investor it’s similar as well. In the buy and hold investing world the loss is a paper loss and you don’t cut the losses. You just continue dollar cost averaging by continuing to buy more of the underlying stock or index fund.

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How to Generate Passive Income

Passive income is indeed real and in this article I want to discuss the differences between active and passive income and how to obtain passive income. Active income is obtained by trading time for money and passive income is achieved by trading minimal to no time for money. I call trading minimal time for money semi passive income and no time for money true passive income.

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