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What is the best asset to invest in?

QUOTE (thomasbeyer2000 @ Jan 15 2009, 03:24 PM) What else is he saying ?
2. Today, as the economy is contracting, cash is king. Yet because the Federal Reserve is printing trillions of Monopoly dollars in order to stop deflation, in a few years we could see a hyperinflationary period. Hyperinflation will wipe out the value of a saver`s holdings and eventually destroy most mutual funds as the government begins to raise interest rates in an attempt to stem inflation. In a hyperinflationary period, gold and silver will be king.

3. I am not actually recommending gold, silver, or real estate. Assets do not make you rich. Assets can make you poor if you are not careful. In 1980 gold and silver hit all-time highs, gold hitting $800 an ounce and silver $50 an ounce. So the suckers jumped in and were slaughtered. The same thing happened with real estate in 2004.

If you do not know what you are doing, no asset can make you rich. Ultimately, what makes you rich is your financial intelligence. Your greatest asset is your brain -- so take care of it and protect it from bad advice
 
QUOTE (EdRenkema @ Jan 15 2009, 03:55 PM) 2. Today, as the economy is contracting, cash is king. Yet because the Federal Reserve is printing trillions of Monopoly dollars in order to stop deflation, in a few years we could see a hyperinflationary period. Hyperinflation will wipe out the value of a saver`s holdings and eventually destroy most mutual funds as the government begins to raise interest rates in an attempt to stem inflation. In a hyperinflationary period, gold and silver will be king.

3. I am not actually recommending gold, silver, or real estate. Assets do not make you rich. Assets can make you poor if you are not careful. In 1980 gold and silver hit all-time highs, gold hitting $800 an ounce and silver $50 an ounce. So the suckers jumped in and were slaughtered. The same thing happened with real estate in 2004.

If you do not know what you are doing, no asset can make you rich. Ultimately, what makes you rich is your financial intelligence. Your greatest asset is your brain -- so take care of it and protect it from bad advice
exactly .. what IS he saying here ? What to invest in ? VERY confusing !!
 
QUOTE (thomasbeyer2000 @ Jan 15 2009, 05:10 PM) VERY confusing !!


Not at all,
invest in your own education, take responsibility for your own actions, conduct your own due diligence, makes sense to me but then I don`t buy into the `it was the econcomy, it was the weather, it was my ex_________ fill in the blank`
 
To reinforce Ed:
Everything in life is determined by knowledge, education, personality, ability to engage in personal growth.

For instance, why are many REIN members on the path to success?

Because in those 4 areas, they excel enough to "win". Or, as the poster used to say on my jr high classroom wall; "your attitude determines your altitude". Cheesy, I know, but we`re dealing with 13 yr olds.


Successful investors train themselves to have a different mindset. This is ALL the difference between success and failure.

That`s why people need to focus and become specialists - something I have struggled with constantly in my life.

People can make or lose money in nearly every method of investing (if need be re-visit the threads on the 5 ways of making money). It doesn`t matter if someone makes money off cash flowing websites, ebay stores, apartment buildings, houses, condos, stock market, "trading", owning a Booster Juice, Timmy`s, being a "money-partner", whatever.

Its all about your mind; and that`s what Kiyosaki is getting at, as a bottom line. Education and training is key.

That`s why long-term cashflow real estate investing offers the "easiest" (yes its hard work), and most "secure" (get some education and know what you`re doing) path for the average person to achieve some measure of passive income wealth. Its "relatively" easy and stable (notwithstanding current volatility) over the long term. Its the most accessible way for most people to have a shot at financial independence, while having some control over the investment. That`s key I think.

I do get what Thomas is saying; tough to reconcile the diametrically opposed concepts that cash-flow is king (it is), but that very cash is becoming more and more worthless (I was alluding to this in another post). Tough to say that people may flock to precious metals like gold or silver in tough times as a cliched defensive maneouver, but on the other hand, stay away from it. And he has a book - I have it, sucker that I am
, about gold and silver investing.

I think the specific point of that specific article was to simply point out be careful from whom you take your advice and there`s no good substitute for your own, knowledgeable, educated judgment.

Confusing times indeed, in many respects, particularly on the question on whether Canadians are self-educated enough to know whether they should stick with their game plan or change it wholesale. Tough. We`re pretty insulated here on this forum, being surrounded by mostly positive, and relatively sophisticated and knowledgeable people. We know from P. Kinch what the stats are; very very few Canadians buy investment properties. So what do they do?

Smitty
 
The article struck me as RK simply rambling on without saying anything specific. He states the obvious which most already know.
I guess in his business if you think out loud someone will record it.
 
QUOTE (Smitty @ Jan 15 2009, 08:07 PM) I think the specific point of that specific article was to simply point out be careful from whom you take your advice and there`s no good substitute for your own, knowledgeable, educated judgment.

Smitty

Nice way to sum up.
I didn`t want to restate the obvious.
What strikes a chord with me is RK`s disregard for the status quo and emphasis on taking responsibility to educate yourself. Oddly enough he writes books on just that subject, I`ve bought a few, so what, I learned a lot and its easy reading. Right now all the `financial advisors` aka commisioned salespeople are putting their own spin on the economic fallout.
RK in one of his books spends a little time on open stock investing via covered calls, I skimmed over it just as I did on Thomas Beyer`s post on the subject, a remarkably similar tutorial. I just don`t want to put time and money into it. I would rather increase my knowledge and experience in RE via the REIN system. Once I`m more financially independant maybe then I`ll `play` in that investment scenario.
 
QUOTE (invst4profit @ Jan 16 2009, 06:27 AM) The article struck me as RK simply rambling on without saying anything specific. He states the obvious which most already know. I guess in his business if you think out loud someone will record it.


Good point, what may seem obvious to you and me for that matter may not seem that way to others. At one time he was advocating precious metals, now he`s not saying its a good or bad strategy, he seems to be saying don`t just do it because he says so, research and learn why it is a sound strategy at this time. (if in fact it is)
Rk writes books on the subject and of course is biased to selling that product as anyone in any business would be.
People on this forum advertise and sell their own product via their own sites and specific ads.

I had a sports trainer who gave me some sage advice years ago:
Listen to everyone, trust noone.
 
RK takes a beating all over the internet for not being specific. It is the CONCEPT of wealth creation he is trying to instill in people. You cant say "buy Real Estate" or "Buy Gold and Silver" because the person that reads/hears that, might be reading/hearing it in a completely differant time or circumstance. His concept of buying silver is absolutly sound...it is a consumed metal, that there is a limited supply of...and if you bought it when his book came out, you have effectively lost money. That doesnt make him wrong...because the obvious thing is, he is right...in the long term. Real Estate might be a good investment, but if you pay too much for it...it might take a long time for you get right-side-up. And THAT will kick the heck out of your ROI. Is Real Estate a bad investment? No. But you gotta take all things into consideration...dont you? People say Calgary cost to much to buy in, but as Thomas pointed out...that is relative to purchase price. This is where the disconnect is in MHO. People want to be told what to do and when and how much, and that is why there is booms and busts and why the cattle get slaughtered...and why guys like Thomas and others here have an enviable net-worth.

...But you gotta use local, timely information to make decisions on whatever you are buying as an investment vehicle...and that has to be tempered with local, timely knowledge of the how and when to pull the trigger...or what an "opportunity" might even LOOK like! (lots of my best deals have been passed on by other people) Anyways, I digress...I think RK is brilliant no matter if Rich Dad is an actual person or not. He understands that it is the ability to use your brain to assess potential opportunities and make astute buying decisions and that has no relavance to the investment vehicle or opportunity as all...it is just the approach to even be able to see things in the first place.

It is a concept. pure and simple.
 
QUOTE (EdRenkema @ Jan 16 2009, 09:23 AM) RK in one of his books spends a little time on open stock investing via covered calls, I skimmed over it just as I did on Thomas Beyer`s post on the subject, a remarkably similar tutorial. I just don`t want to put time and money into it. I would rather increase my knowledge and experience in RE via the REIN system. Once I`m more financially independant maybe then I`ll `play` in that investment scenario.


I am trying to make some money writing covered calls. This is some learning experience for me. I made earlier in the year some good money but now I start to wonder whether I just lucked out. I have made money this way in the past as well but there is risk!!

First of all covered calls are a form of option trading. At the surface it looks like a beautiful scheme - but watch out. The idea is to sell someone the option to buy shares in company XYZ in the future (say three months from now) at a certain price (strike price). If the shares trade below the strike price during and at the end of the 3 months period the options expire worthless for the buyer. So the buyer risks 100% of his investment. You the seller walk away with the proceeds of the option sale and do not have to supply the shares at the strike price. You can play this game over and over again.

If the shares trade above the strike price the buyer may decide to demand the shares at strike price. Then he can turn around and sell the shares at the real trading price and pockets the profit. So basically this is a game (for the buyer) of making a big profit on a very small investment (the option purchase price) using extreme leverage - your investment money. From your side of the deal, if the stock trades above the strike price, you will be obliged to sell the shares to the option buyer at the strike price. If you don`t own the shares, you will have first to buy the shares in the market at current prices and sell them for the lower strike price, i.e. you`re in the sh.. house. People being forced to buy shares at a higher price and sell them for less end up poor. This is pure gambling.

Selling these call options without owning the shares at the time the option is sold is called selling UNcovered calls. If you already own the shares and bought them at a lower price your options are covered and you make the difference between your buy price and the strike price plus the proceeds of the options sale. No big deal (you think) because you are either happy with the profit you made or you buy the shares again in the stock market.

Now what is your real gain if your options are called and you have to hand over the shares at strike price:

Say we are dealing with 300 shares of Power Corp which you bought at $23.00 plus commission through your full service stock brokerage:

Purchase costs: 300 x $23 plus $150 minimum commission
Sale of call option with symbol POW C APR 26. That is a call option expiring in april (3rd Friday of the month) with Strike Price $26.
Proceeds $0.65 per option (trades just like a stock with bid and ask) so: 300 x $0.65 minus commission $150 = $45

On March 10, Power Corp is trading at $27 and your option is called. You deliver the options at $26 per share.

Your profit:
300 x $26-$23 = 300 x 3$ = $900 minus commission
Your stock went ex dividend on March 12 so the option buyer will receive the quarterly dividend of $0.30 per share (or any other new owner on March 12). So you missed out on 300 x $0.30= $90 and got the option proceeds of $45 instead, i.e. your down $45
/>But there is more: you will have to pay capital gains tax on $900-$150 equals in Alberta 0.38 x $375 (half of profit on share sale) = $142.50. That would have been basicall a $142.50 interest free loan from the Gov of Canada if you would have kept the shares for future appreciation and dividends.

So may be not such a great deal afterall. The only way you would have made money ($45) is if the option had not been called and you played the game again during the next 3 months and the next and so on.

If you invested for the long run and you had owned Power Corp for many years (say you bought it 5 years ago for $14) the cap gains taxes you would have to pay would be a lot more than $142.50.

So my conclusion is that you want to write call options in only three ways:

1: through a discount broker where your commission is $14 rather than $150 per trade minimum
2: when you were planning to sell the stock anyway because you have reached your price target and the stock is severly overvalued.
3: or when you are in a loss position and when called you can claim capital losses rather than gains.


Hope this helps
 
QUOTE (gwasser @ Jan 16 2009, 01:04 PM) So my conclusion is that you want to write call options in only three ways:
1: through a discount broker where your commission is $14 rather than $150 per trade minimum
2: when you were planning to sell the stock anyway because you have reached your price target and the stock is severly overvalued.
3: or when you are in a loss position and when called you can claim capital losses rather than gains.


Hope this helps

This helps immensely.....

I`ll stick with Real Estate for now (the operative term is Real)
 
QUOTE (Nukav @ Jan 16 2009, 12:57 PM) Anyways, I digress...I think RK is brilliant no matter if Rich Dad is an actual person or not. He understands that it is the ability to use your brain to assess potential opportunities and make astute buying decisions and that has no relavance to the investment vehicle or opportunity as all...it is just the approach to even be able to see things in the first place.

It is a concept. pure and simple.

I concur, RK helped me realize that money is simply a financial tool and as a fiat currency is a medium of exchange to be had only for what it can buy and not as an end in itself.
 
QUOTE (gwasser @ Jan 16 2009, 12:04 PM) I am trying to make some money writing covered calls. ...

So my conclusion is that you want to write call options in only three ways:

1: through a discount broker where your commission is $14 rather than $150 per trade minimum
2: when you were planning to sell the stock anyway because you have reached your price target and the stock is severly overvalued.
3: or when you are in a loss position and when called you can claim capital losses rather than gains.
or
4. because you wish to REDUCE YOUR RISK .. by selling an IN THE MONEY CALL, i.e you case a $20 or even $17.50 CALL .. you are protected and make money even if the stock falls to: strike price - option premium , or

5. because you wish to make income, i.e. sell calls every months well above the current price will will liekly always expiry worthlessly, or

6> because the market is flat and volatile (like right now) and you wish to have a "chequing account" type cash account with some decent % ROI (say 6-15% annually)
 
Gwasser:Please discuss the varying degrees of "purity" in investments and gambling. Were there other forms of investing less pure or unpure, more or less gambling? Ok, I`m being bit of a smart alec. 95% of the previous sentence is in jest.

Clearly there is a small measure of futility - and that`s perfectly ok - of trying to clear up some misconceptions (small or grossly large) about alternative investments like options on a message forum/board full of sophisticated real estate investors. But Ed`s philosophy is bang on; stick with what you know and what works for you.

But there`s nothing like the US real estate market - and parts of Canada - like the market we`ve witnessed from the past 16 months to definitely prove once and for all that any investment - including real estate! - can be used for pure gambling.
Not that well educated REIN members are guilty of lining up to get wrist bands for pure, speculative pre-builds.


What I wanted to really underline is Gwasser`s point is that yes indeed, using a full service brokerage to buy stocks and to "play" options is an exercise in sheer ridiculousness (nice word eh). Must use a discount broker, and you can pay less than $14. [$150!?!?!?!?! Who would pay that, unless they had a relatively huge position??]

Ed, I hope we run into each other tomorrow or sometime, I`d be happy to buy you some coffee and give you some "Caesar`s Palace" aka "Bellagio" ideas on what to do with a TFSA. They`re more conservative and far simpler than you might think.


Good investing, and hope to see alot of you at the all day REIN workshop,

Smitty (Mike)
P.S. Last note - more and more people investing on their own, all the more reason to have one, national securities regulator. There would have been far -FAR!- more US brokerage houses in Canada right now offering severely discounted commission fees to the avg Joe had they not run into so much red tape and beauracracy from having 10 different bodies. Totally stupid, and I think our prov. gov. look very shortsighted, and completely uncaring about the retail investor by opposing this.
 
QUOTE (Smitty @ Jan 17 2009, 12:10 AM) Gwasser:

Please discuss the varying degrees of "purity" in investments and gambling. Were there other forms of investing less pure or unpure, more or less gambling?


Ok, I`m being bit of a smart alec. 95% of the previous sentence is in jest.


I know you made this remark in jest and it is kind of funny. Provided you really see the difference. I have seen many friends thinking they were investing when they were in reality gambling. Too many people have lost their shirts doing this including my own father who lost his retirement in the Tech Bubble. Not because he was greedy but because he did not know the difference between investing and speculating and neither did his inexperienced stockbrokers. This was outside Canada and my father had sold off his business (sporting good store). He was a great store owner and he made a living not only for himself but also for his family, including my education. So he did good, but he never invested in anything but his store during his entire live and then he retired and sold the store.

So he had this wack of cash and didn`t know what to do with it. I helped him (the last time I will give anyone specific investment advice) set up his portfolio and left for Canada. Unfortunately his portfolio did well and his `banker-brokers` - in fact guys just out of school who never invested themselves - enticed him into high-tech funds. Well, you know what happened in 2001-2003. Thank the lord there is a good social security network in western Europe because he lost his shirt.

Why? No investment experience, poor advisors and no sense in investing versus speculating or gambling. This is what you learn in REIN, i.e. looking at the fundamentals, invest for the longterm in sound businesses with growing income and dividends or in real estate properties with positive cash flow. My father and his `advisors` tought he could invest in high tech stocks that did not make money because tomorrow the price would be even higher although nobody knew why. The same happens in real estate when you flip properties or buy properties that don`t make cashflow - e.g. pre-construction buying of Calgary downtown condo developments.

Yes even more `sophisticated` or knowledgable investors do speculate. I do on a rare occasion but overall for me cash flow is number 1. I do try to stay away from market timing and build a diversified portfolio. This strategy of investing in cashflowing properties or in great companies that pay dividends has served me well, especially over the decades; but certainly not over the short term, e.g. last year.

So every joke has a basis (however small) in reality. That is what humor is about - having the guts to laugh at your own mistakes (and learn from them). B.T.W. every day I still learn the often hard lessons of investing. I have been doing so for the last 30 years - one day I will be truly good - I hope. In the mean time I better keep my sense of humor weird as it may be.
 
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