Banjo Smyth

Hitler is informed that he has missed the ‘09 Bull Market.

Very Funny Stuff!

Today I would like to look at WHY everyday people think that the stock market is risky.

The simple answer is because most everyday investors lose money when they invest in the stock market. . . . . let’s have a look why?

The history of the stock market shows us that if you were to invest ‘long term’ you would have made a good profit. Why then do a large percentage of mum and dad investors lose money on the stock market?

Everyday investors have a ‘great’ habit of investing when the market is at its peak (or during the top 30% of the cycle). They tend to get caught up in the media hype and buy when the market is close to fully priced. Do you remember the media during the recent commodities boom? There were articles everywhere about how ‘this boom is different’ and it will ‘last forever’ or oil prices to top ‘300’ etc etc.

Unfortunately the media are terrible investors. By the time the media are reporting on investment trends or prices the chances are that the stock prices have already been affected and you have missed the boat. To make matters worse for mum and Dad investors not only do they generally buy at the peak of the market but they sell and the bottom as well. Why? Once again they believe the media hype and jump ship when their investments have halved in price. Notice how the same people that were convinced the commodities boom would last forever change their tune are write about how this stock market crash going to last forever.

Successful investors don’t make their investment decisions based on what the newspapers are saying. They look at internal market indicators that steer clear of media hype and make rational decisions based on value and facts. In recent time Warren Buffet has been criticized for his investment decisions. So called experts have said that ‘Buffet has finally lost his touch’ and that he must be crazy to invest so aggressively during these hard times. Let’s wait and see what happens – who’s side are you going to on?

The media

Vs

Warren Buffet

I know whose investment strategies I will be following

Are you willing to take the time to be grateful?

It sounds like a silly question but a lot of people simple don’t take the time to stop and be grateful for what they have.

Lets have a look at the current economical crisis – Would it be such a stretch to see the 2008 stock market crash as an amazing opportunity and be grateful for it?  Some people would disagree but I truly believe we are living in one of the most exciting times EVER in terms of investing.

Kurek Ashley tells us about his life before he had mastered his wealth & Health. He tells a great story about John Travolta picking him up at his ‘house’.

Have a look

Kurek looks at the different types of habits that humans have and how they negatively or positively effect our lives.

Its no good quitting smoking if you replace it with eating lots is it?

Kurek and Sean look at how to replace a negative habit with a positive one – Take a look!

Kurek looks at a great strategy for achieving your goals.

He calls it the ‘Be Do Have’ system

Rather than thinking “When im rich im going to be so happy” why not try getting rid of the ‘when’ and start being happy NOW?

In order to have the things you want you need to start being and doing the things that create the results you are after.

Just thought I would give you a quick update about how I fared in the Melbourne Marathon on the weekend.

First of all I managed to finish which was my main goal

My time was 3 hours and 50 minutes which was 10 minutes under my 4 hour goal -  so I was very happy.

The best part of the day was being surrounded by over 20 thousand fit and active people.  There was a great atmosphere and feeling throughout the race – nothing  is more inspiring than seeing an 80 year old grandmother completing in the full marathon.  What an effort!

I had trained and prepared well so my run basically went to plan.  At 30km I started to feel the pain but the hardest part for me was from 40km to 41 km.  For the past 10km I had been telling myself “just make it to the 40km mark and you are basically there”.  This worked very well but when I actually got to the 40km mark I realized that I wasn’t there at all! – I still had 2 more bloody km’s to go

Anyway – Thanks to everyone for all of your support and encouragement and let me know if you want to join me for a marathon in the near (or distant) future

Cheers Banjo Smyth

People that rent out their shares get paid by the people who buy call options. So let’s say we buy 100 ABC shares at $100. The next thing we would do is sell a covered call (it is called covered because we actually own the shares) at $105. We always want to sell a call option that is out of the money (above the actual price of the share). Why because that way if we are forced to sell our shares we will at least be forced to take a profit. For selling a one month call at $105 we are likely to receive about 3-6% of the shares price. So in this case let’s assume that we receive $5 per share.

I’m sure you don’t need any help with step 3 but you might be wondering why we can simply forget about our shares rather than monitoring them each day. The answer is simply because we aren’t too concerned whether they share price goes up or down. Why? Well lets now have a look at what would happen should the share price go up, down or sideways.

Share price goes up above $105 to $108.

We will be forced to sell our shares for $105 despite their actual price being $108. This sounds like a very bad out come but if you have a closer look it is actually a great outcome. We bought our shares for $100, sold them for $105 and also got paid $5 for the month. Therefore we actually made a $10 profit whereas if we had of just bought the shares instead of renting them out we would have only made $8.

Share price goes sideways and remains at $100.

We will get to keep our shares because no one is going to pay $105 for shares that could be bought for $100 on the open market. So in this case we have made a profit of $5 whereas if we hadn’t rented our shares we wouldn’t have made one cent.

Share price goes down to $95

Once again we will keep our shares. Had we not rented out our shares we would have lost $5 but because we received the $5 premium we actually don’t loose a cent.

So as you can see renting shares is actually quite a safe wealth creation strategy. Effectively what you are doing is trading of your potential to make a massive gain in one month for a regular monthly income. Which one is better? Well if you average out your percentage returns from share renting over the year you may be surprised at how effective it can be. Share renting returns generally fluctuate from 20-80% per annum. With a modest average of about 40% – better than bank interest I’m sure you will agree.

Renting shares is fast becoming one of the most talked about Stock Market Investment strategies. More and more investors are looking at creating income from their shares and capital growth from property. But what is share renting? Is it legal and can anybody do it? Let’s have a look at the basic concept of renting shares and see if this investment strategy is something that everybody should have a look at.

Renting out shares is very similar to leasing out your property for rent. The basic share renting strategy is as follows.

Step 1/ Buy a parcel of shares. If you are in Australia you will need to buy in lots of 1000 whereas in the US you can buy in lots of 100.

Step 2/ Sell a one month call option, one strike price out of the money.

Step 3/ Enjoy yourself for the month e.g. Go to the beach, watch the footy etc.

Step 4/ This will depend on where the share price is at the end of the month. Read below for more details on renting shares.

Now if this doesn’t make much sense I will now try to explain it in some more detail.

The reason why you need to buy your shares in groups of 100 (1000 in Australia) relates to step 2. Call options are sold in lots of 100 shares e.g. If you buy 1 call option you are actually buying a call option for 100 shares.

What is a call option?

A call option gives the buyer the right but not the obligation to buy a set number of shares, on or before a set date, at a predetermined price.

For example Lets say the stock ABC was trading at $100 and somebody bought a call option at $105 that lasted for one month. This would give them the right to buy ABC at $105 no matter what the actual price of ABC was at anytime during the next month. In order to get this right, the person buying the call will need to pay the seller a premium.

The next step is where we come in.

Come back and see part 2 in a few days.