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.

I’m sure you are probably thinking – what is the “Law of Opposites” and what does it have to do with Investment Strategies & Wealth Creation? When I first heard one of my mentors (Jamie McIntyre) talk about his Law of Opposites theory I was thinking exactly the same thing.

So what is Jamie McIntyre’s Law of Opposites?

The law of opposites is an incredibly powerful tool that can be used to help develop the mindset of a millionaire and in turn create a successful life. Quite simply Jamie McIntyre suggests that one of the best ways to become financially successful is to

“Find out what most people are doing and then do the exact opposite”.

This means that when you are faced with a decision or a particular situation, you should think about what the average person would choose to do and then do the exact opposite. As funny as this may sound, if you start using the law of opposites I can almost guarantee you that new and amazing experiences will begin to enter your life.

When Jamie McIntyre first told me about his law of opposites theory I thought he was being silly. How can the law of opposites help you develop the mindset of a millionaire, surely its more likely to develop the mindset of a ‘crazy lunatic’ who has a severe blockage in their decision making process? After reassuring me that he wasn’t a ‘crazy lunatic’ he proceeded to explain why the law of opposites is in fact a crucial part of developing the mindset of a millionaire.

When I look at the results that most people’s actions are producing they are way below my expectation. So if you want to produce similar results to these people then your task is very easy - Simply make the same or similar decisions that they are making and you will be just like them in no time at all. What Jamie McIntyre is trying to say with his law of opposites is that to be successful you need to do things differently than the general public. You need to start developing your mindset of a millionaire and stop making the same decisions as everyone else.

The best example that I can give you of Jamie McIntyre’s Law of opposites in effect is how most people approach becoming financially rich or wealthy. Rather than trying to get a financial education and develop the mindset of a millionaire most peoples attempt at becoming wealthy is to buy a whole heap of tattslotto tickets. If these people would take the time to educate themselves in the world of finance they would be astounded at what they could achieve.

Forget any fancy strategies or crazy ideas, if people could learn and master one simple concept like ‘compounding interest’ their lives would start to change forever. I am always hearing from people who are worried about how they will be able to afford to pay for their child’s education but did you know that if you were to invest $3.33 per day into a fund that was earning 15% that by the time your child turns 19 it would be worth $110,424. Then if you stopped contributing and let the money to continue to grow on its own it would be worth

- $9.6 million by the age of 50

- $39.2 million by the age of 60

- $158.2 million by the age of 70

Basically that means that if you were to give up a ‘soft drink a day’ or your weekly tattslotto ticket you would be able to leave your children a multi million dollar inheritance. When you start to create the mindset of a millionaire you will never cease to be amazed by the things you can create.

The ironical thing about tattslotto is that within 3-7 years of winning, most people are in a worse position financially than they were to begin with. Why? Because they haven’t developed the mindset of a millionaire, they have simply been gifted a whole lot of money and they don’t have the correct skills to make their money work for them.

Imagine if someone was to offer you the choice of these two things

They will give you a million dollars in cash

or

They will teach you how to create the mindset of a millionaire

What would you choose? I know what most people would choose and to be honest a few years ago I would have taken the cash too but after developing my own mindset and learning to implement Jamie McIntyre’s Law of Opposites I know that it would be the wrong choice. In order to succeed we need to branch, take some risks and develop the mindset of a millionaire. Funnily enough, sometimes the best way to do this is to see which way most people are going and head the other way.

Surely everybody has felt this way at some stage?  So what IS the answer?

Whilst there might not be a ‘definitive’ answer to this question - there are definitely better and worse places to begin your quest towards financial freedom.

Robert Kiyosaki (the author of Rich Dad, Poor Dad) talks about the three main vehicles that the rich use to create wealth.  They are as follows

Stock Market

The stock market allows you to ‘buy in’ to a company and in turn receive a ‘share’ of the company’s profits or losses.  Professional Investors generally use the stock market to create cash flow.

Real Estate

Buying Real Estate can be less scary for the novice investor as you are buying a ‘physical thing’.  The ability to ‘leverage’ your money is one of the best features of Property Investing.  Professional Investors generally use Real Estate for long term capital gain

Business

Business can include everything from owning your own business to being employed by someone else.  If you think about it having a job is just like running a business but rather than selling a product you are selling ‘your time’.  Wealthy people use their ‘business’ to help fund their Stock Market & Real Estate investments.

I would like to add a fourth category 

Mindset/Education

Whilst you don’t physically ‘make money’ from this category, there is no way that you can create any amount of wealth without having a strong mindset and knowledge base.

So where should you start?

The first and most important thing you need to do is ask yourself “why do I want to be rich’?  Everyone ‘thinks’ they want to be rich but not many people take the time to explore what they would actually do if money wasn’t an obstacle.  Remember being Wealthy isn’t just about having lots of money.  There are plenty of people who earn millions of dollars a year but don’t have any spare time to see their family or who aren’t actually happy with their life.  To be truly wealthy I believe you need to have abundance and choice in four main areas

1. Financial – have enough money to do everything you dream of
2. Time – be able to spend your time how YOU want
3. Family/Love – have great relationships and a group of people you care about
4. Achievement/Contribution – be proud of who you are and what you have done

So when you ask yourself ‘why do I want to be rich’ make sure your answer includes all of these areas in some way. 

The next thing I would do is ‘Surround yourself with people who have what you want’.

Or in other words educate yourself.  There is plenty of great Wealth Creation information out there and the best part is that a great deal of it is Free.  A little Warning – once you begin learning new investment strategies and Wealth Creation ideas you will no doubt begin to feel liberated and excited.  DON’T let yourself be scared or put off by uniformed people who know less about the subject than you.  Jamie McIntyre talks about the ‘law of opposites’.  In short he is saying “If you want to succeed, you need to figure out what most Australians are doing and do the exact opposite”.  Remember, ‘Surround yourself with people who have what you want’ NOT ‘people who have what you already have’.

The next step is to decide what your first strategy is going to be.  Will you use the Share Market, Real Estate or your Business?  Always remember to start small, don’t try to ‘bite off more than you can chew’ and definitely don’t get too far ahead of yourself.  If you try and go too fast you can end up having a bad experience and it might turn you off Investing for life.  Once you find a strategy that works then repeat it and start looking for  a different strategy to learn.  As Robert Kiyosaki says the Stock market, Real Estate and Business will create the best results when they are employed in unison BUT you need to walk before you can run.  One strategy at a time is definitely the best option.

The final step and by far the hardest and most horrible part of this whole process is to reward yourself!  Celebrating your successes will encourage you to continue your good work and always remember there is much more to being wealthy than having lots of money.  So what are you waiting for?  Take action now, quite simply just  ‘Do Something’.  

Remember “A journey of a thousand miles must begin with a single step” - Lao Tsu