Baseline for Return on Investment

You have to have a baseline you will not go below as a stock option investor. Phil Town give a valid reason why RULE #1 investors aim for 15 percent investing return. The reason is that anything lower is just too low to account for the risk of investing.

stock trading originally learned this when I was doing venture capital that the rate of return we had to air for in a early stage business of business development (assuming everything worked as planned) was at least in 50%  range per year.  options trading did that because in venture capital investing in a typical portfolio of ten businesses, most often two of them would fail most certainly, another 5 would do far less than Phil expected, and 3 would succeed or exceed  investing expectations.

In order to maintain a rate of return that was acceptable, we had to be sure that on the 3 that did well, our rate of return was astronomical to pay for the rest of the investments that did not do so well.

It’s part of a Rule #1 mentality.

First, we begrudge losing money on anything.  We do our homework to make sure we are certain we won’t lose money.

Then, if we do lose it, we expect that we will exceed expectations on a few investments, and those excess returns will make up for the losses.

If we settle for valuations of businesses that are based on a lower rate of return like, say, 8-9%, we will be getting in at higher valuations and thereby have less upside because we bought in too high. With less upside potential, we are going to have a lower overall rate of return because there won’t be so much profit to fill in the holes created by the occasional screwup.

Keep your default rate of return (or “discount rate” if you’re using Investools) at the expected overall rate of return in a RULE #1 portfolio.  Yes, it will make it harder to get into some good deals — but you will be glad you were patient when the occasional deal you did get into launches to the moon because you bought in at such a great price.

Payback Time workshop freebies

Payback Time Scholarship ID Registration, by Phil Town, has begun. Fans of Phil Town can register here to obtain your scholarship ID. This unique number, along with a copy of the new book by Phil Town, will enable you to attend the Payback Time Workshop of your choice… absolutely free of charge! What a great deal. These dynamic 2-day workshops, will bring together financial revolutionaries just like you from around the country and will cover the Payback Time concepts in detail.

If you bought a copy of Phil Town Payback Time contains 2 scholarship offers, one for you and a guest, valued at $2,995.00 each. You will need to walk through the registration process here to receive your Scholarship ID number. You can register your friend here as well. If you do not yet have his or her information you may go to yourMyPaybackTime account page to complete a guest registration up to 24 hours prior to attending the workshop.

Looks like your guest must attend the same workshop that you attend. Entry to the workshop requires that you and your guest bring two items: Your scholarship ID receipt (posted on your MyPaybackTime account page) and a copy of the Payback Time book. Each of you must bring your own Scholarship ID receipt.

Sounds like an wildly cool deal for investors of all ages. PAYBACK TIME is causing a stir in the investing world.

Phil Town on counter investing

During the Great Depression, the stock market dropped to about 55 from its peak price of 375. That’s a little more than an 85 percent collapse. I doubt we’ll see things deteriorate that far, but they could according to investing expert, Phil Town. Japan has been in a severe recession for years and its stock market has dropped 85 percent. An 85 percent drop from 14,500 would put the Dow at 2,175.

All this is horribly depressing, and Phil Town knows this.  But remember, if you’re a stockpiler of stocks, none of it will matter to your personal investments. You can get off the Dow Jones hamster wheel. If the market goes up from here, we’re going to make money on the stocks we stockpile, because their prices will rise to their value in a rising market. And if the market goes down, we’re going to be even happier, because we’ll have lots of opportunities to load up on more great businesses at really great prices, which will make us even richer when the market does go up. This is somewhat counterintuitive but really can work well.

Buy and Hold taught by Phil Town

PAYBACK TIME is the new book by Phil Town that spells out for you exactly how to do long term, buy and hold, stick it away forever investing.  It is about how the best long term investors in the world go about making those gigantic long term 20 year compounded rates of return of 30% to 50% per year. Phil Town says that the one and only secret to stockpiling is to make sure the value of the business is substantially greater than the price you are paying for it. Phil Town will swear to you that’s all there is to it. If you get this right, you cannot help but get wealthy.

If you follow what Phil Town taught you Stock Option Trading TIME, you can just clobber the  stock market, too and get your retirement back on track.

Investing tip with Exchange Traded Funds

Many of American are investing in mutual funds now and are going to keep their money invested in the market while they learn to begin to stockpile stocks on their own.  If options trading were going to keep his capital in the market but not invest it on his own yet, He’d put his money into Spyders—the exchange-traded fund for the S&P 500 (symbol SPY). Phil Town thinks that the average fund charges about 1.3 percent fees. Whereas the  SPY fund only charges .08 per- cent. That mean you’ll pay 16.25 times less for SPYDER which is a big difference. If you have $10,000  worth of investments in your 401(k) in the average mutual fund, you’re going to pay about $200 in fees. Compare that to the spyder fund and you’ll pay only $8 for SPY.  Now that is  the first good thing, because you just received  a 2 percent return just for knowing a little thing about your money. And even better, today that 2 percent represents a significantly better return than you would get in a one-year U.S. Treasury bond. You can make money on SPY by trading it using a simple computer tool called a Moving Average. Phil Town thinks that just for having a little knowledge. The second is SPY is going to do the market rate of return because it is the market. It’s a stock that mirrors the S&P 500 index by buying the index stocks. If the S&P 500 index goes up 20 percent next year, SPY will go up 20 percent, too. Same with going down 20 percent, of course, but SPY eliminates the mutual fund fee and then achieves what the vast majority of mutual funds fail to achieve—a market rate of return. This one change in your options trading will solve the problem of being ripped off for fees. It doesn’t solve the problem of making nothing for the next ten years if the market goes nowhere.

Quick and important rule

Options trading education offers you a really important rule. I use the Rule of 72 all the time. It isn’t perfect but it’s quick and dirty and does not require a calculator. Book value per share in 1999 (the oldest number) is .40. In 2004 it was 8.41.
Start doubling .40. double once to .80. Double twice to 1.60. Double three times to 3.20. Double 4 times to 6.40 and then part of a double to get to 8.41. I look to see the number of years. 1999-2000 is one, and so on. I get 5 years with 4 doubles. That’s a double almost every year.

Divide 1 into 72 and you get 72. So EXBD has a book value per share compounded growth rate of 72% for the last 5 years in this example.

You gotta love the rule of 72 for quick and dirty work. You get to where you can just glance at the numbers and then quickly do the doubles on the oldest number and see if the equity growth rate is high enough. Does that make sense. Now go do options trading.

Phil Town advices to pay down debt 1st

Options trading with Phil Town remembers one of the great advantages of being in the military a long time ago is that you don’t get too worked up about the little things that go wrong in my life now.  Once you’ve been shot at, everything else seems relatively minor.  So the first thing I can tell you about having too much debt is to keep it in perspective.  Nobody died, we’re still healthy, we’re still in the game.

Phil Town’s Payback Time arrives soon

Phil Town‘s new book, Payback Time(Random House), like Rule #1, is arriving soon.  Phil Town understands that investors who have made the move from mutual funds to picking their own stocks need a help for doing RULE #1 investing, and that the current market is a place that’s full with bargains to be invested in. That if you’re going to buy into a mutual fund, you might as well invest in an index fund.

Instead, Phil Town offers a strategy he calls stockpiling”, and  showing how investors (Warren Buffett) made huge amounts of money by investing in downturn markets.  This isn’t about stock trading, it’s about buying stocks and holding them for the long term, with dividend reinvestment packages.

Phil Town‘s Payback Time Will Revolutionize Investors approach to buying stocks. Phil Town writes bestselling, wildly successful investment advice.  Bestselling – like his first book, Rule #1.  Radical because he focuses on the sorts of things that don’t make splashy instant millionaires.  Like doing the research needed to figure out what a business does, and to assess how it’s valued versus its potential for growth, in a Warran Buffett style “Buy and Hold” strategy.  His first book covered a number of key investing and financial planning concepts like ROI, Capital and Equity, and what to look for in financial disclosure forms.  The truth is that investing in stocks means spending more time looking for things to mess up the deal on investments.

Comparing investing options

Phil Town investor and teacher. Phil Town wants to look at the difference between investing $ fifty thousand now in real estate vs. fifty thousand now with Phil Town investing strategies.

Here are the numbers that you will need to consider:  You buy a $250,000 house someplace for fifty thousand down with a 6% 30 year fixed mortgage.  Your payments are $1200 a month but you rent it for $1200 and cover your mortgage payments.  You are, however, in the hole for insurance, maintenance, advertising and taxes.

On the other hand, Phil Town suggests to allow you to never miss a month’s rent and you can increase the rent by 4% a year.  By your 9th year, you’ve been able to increase rents enough to cover everything.  From there on to the 30th year it’s all cash flow.  Then you sell the place.  At that point, the house is worth $811,000 and is totally paid for.  Plus you’ve pocketed another $175,000 that you reinvested wisely and made the same return on that as on your house over all – about 10% per year for an additional $440,000.  Total return equals $1,251,000.  Your compounded ROI for 30 years is 11%.  Quite respectable although I did not deduct for management which I expect you will do yourself.  This is not an insignificant headache and makes scaling up the investment dollars difficult.  Nonetheless, let’s compare that to our 15% minimum Rule #1 return.

First, we have no management.  We do not have to negotiate.  We do not have to drive around neighborhoods looking for a deal.  These are not insignificant advantages.  What we do have to do is spend about 15 minutes a week managing our few businesses.  And we have to know how to do Rule #1 investing, of course, but it’s easy to learn once you see the advantages.

We do Phil Town investing with our $50,000.  Since we’re going to use leverage in the real estate transaction, we’re going to use it here, too.  Our online broker will lend 50%.  Now we have $100,000 for Phil Town investing.  We buy a wonderful business at an attractive price and sell it when it gets unattractive and buy another one.  We do that for 30 years averaging 15% but paying 8% margin costs on $50,000.  (I’m not getting taxed in either case because I’m doing both in an IRA).  After 30 years, my investment is worth $6,500,000 after deducting margin costs.  My 30 years compounded ROI is 18%, only 7 points higher than the real estate transaction, but 5.3 million dollars more in my bank account.

But if you are a Phil Town investor, you will continue to invest the $6.5 million at 15% and then live on the 15% increase each year.  That means you are receiving about $80,000 a month.  That’s not a typo.  Your income off the 6 million is almost 1 million a year.  Of course you do have to pay tax on that so you’ll end up with about $50,000 a month which is only $20,000 in today’s dollars.

So don’t stay ignorant of Rule #1 investing, go exclusively for real estate and try live on the result the rest of your life or become a Rule #1 investor.

Phil’s Motorcycle Trip

If you’ve seen Phil Town speak you have probably heard him talk about his bad boy motorcycle days.  Phil Town started riding as a kid on a Honda 350 then graduated to a Triumph Bonneville, then on to Harley Davidsons.  Once Phil Town rode from Panama to San Francisco back when the Pan-American Highway was still gravel in lot of places.  On that trip Phil rode solo through countries that were in the middle of revolutions, through rain, through freezing mountain passes and finally, after several weeks on the road Phil Town made it across the Guatemala-Mexico border and turned toward a warm desert and Vera Cruz.  It’s a long empty stretch of road on the map and just as empty on the ground, but it looked warm.
Once Phil Town was doing about 60 MPH when I saw a cow walking slowly across the road in front of me.

This was not the first cow on the road on this trip, so he wasn’t really paying attention.  Without thinking, Phil rode in front of her instead of behind.  She spooked, jumped and he hit her broadside.  When I woke up I was staring vacantly up at a blue sky and couldn’t figure out where I was.  Then I remembered flying over the back of the cow.  I slowly checked myself over for major injuries, found, miraculously, there were none, then got up and saw the bike was seriously messed up. The impact was on top of the fender and into the forks.  The fender was smashed into the tire, the forks were twisted and bent, the handlebars were tweaked 90 degrees to the left and shoved back, the headlight was destroyed and the gas gauge and speedometer were smashed into garbage, the front of the gas tank was bashed in.  The engine had been shifted about an inch to the rear so the chain was off and I was standing there in the middle of a desert  2000 miles from home looking at a bike that might not work so well.

Unfortunately, the rest of the bike didn’t work so well.  The twisted forks meant that to get the front wheel pointed straight ahead, the right grip and throttle were sticking out over the front tire and the left grip and clutch were in my stomach.  But it was ride-able.  Which was good because there wasn’t any choice.  Phil Town was in the middle of nowhere and in all the time from the crash until now no one drove by so help so he had to ride it like that.

Phil started off pretty wobbly but I got the hang of it and after about 10 hours he made it to Vera Cruz, where he checked into a real hotel right above the square.  My right ankle was too swollen to get my boot off, so he had to peel off his pants, hung that leg out of the tub and washed off the blood and grime from the crash.  There was no repair shop in Vera Cruz so the next day I limped out of Vera Cruz for Puebla.  Going up the Puebla grade he forgot his foot didn’t work and he fell over in front of a bus and got trapped under the bike.  He missed Phil.  Other than that it was just slow and uncomfortable.  There was no repair shop in Puebla either.  So I rode it all the way into Mexico City.  500 miles with my left hand in my stomach. I got to a repair shop, checked into a hotel and immediately got Montezuma’s Revenge.  That was a really tough week.

Phil Town thinks the experience with the cow informs the way he does investing.  Failure on a motorcycle is not an option.  Neither is failure as an investor.  Rule #1 investor invests to not lose money like a motorcyclist rides to not run into cows.