As all traders know,  Capital Protection is rule number 1 on any portfolio. So if this is the case, why have so many people lost massive amounts of money over the last 12 to 18 months? The doom and gloom of the current economic crisis should be an indicator that we need to protect our assets. You wouldn’t own an investment property and not insure it against damage or loss of rent, would you? So why would you invest thousands of dollars in the stockmarket with the risk of losing it all. Perhaps it’s because a lot of people simply don’t know that this strategy is available. So, assuming this is the case for some people, I will attempt to explain the how and why.

Whenever we buy stock in our Renting Stocks portfolio, the first thing we do is buy insurance to protect the stock in case of a big fall in price. However, we can live with a small loss and therefore don’t need to insure the full cost of our shares. This will obviously incur a charge, but it is taken from the premium we received from renting out our shares. That way, will still make a profit, but just not as much. At least we have insurance though right?
It is only necessary to insure against a really big drop in price, therefore we only buy insurance a few dollars below the current stock price (which protects the bulk of our money, but not all of it).
Let’s use an example to help me explain:

Company XYZ is trading at $19.97. We bought 200 stocks and would therefore buy insurance at $15 to protect most of our capital. Our rental premium was $240 for our 200 stocks and lets say it cost us $72 to insure our stocks at $15. This means that after we receive our rental ($240) and buy our insurance ($72) we end up with $168 of income.
Now that we have insurance, we have a guarantee we can sell our stock at $15 – regardless of its current price – at any time before the rental period expires.
Let’s look at the worst case scenario: Something happened to XYZ and the share price dropped considerably, let’s say all the way down to $5.
If we didn’t have insurance, we would be looking at a loss of $14.97 per stock, or $2,994 for the trade. That’s a big chunk of our initial investment, which was $3,994.

Imagine if the absolute worse case scenario happened – the company went broke – making the stock price zero. That would mean we’ve lost ALL of our investment! That’s nothing short of a disaster. But here’s the good news…
Because we have insurance, we have a guarantee we can sell the stock at our insurance price of $15 (even if the company goes broke).
That means we have only lost $4.97 per stock, or $994.
That’s the most we can ever lose, even if the stock went to zero.

So, for the sake of sacrificing a little bit of profit, we are guarenteed protection against any type of loss. We bought the stock for $19.97 and if the price ever falls below the $15, we can claim it back and be guaranteed to sell them at $15. Now to me, that makes a lot of sense. We must be in this for the long term and sacrificing some of the profit just to stay in the game, really makes a lot of sense. We are not here to get rich quick. We are here to replace our income and provide consistant profits, month after month.

Until next time, happy trading.

Stuart Ginbey

Planet Wealth E Books

We have to look at this from 2 different perspectives:
1. Stock price goes down a little bit.
We bought the stock for $19.97 and lets say they went down to $19.00 by the end of the month. That’s a ‘paper loss’ of 97c. However, it won’t be for us because we have received a premium for renting out our stocks. We received $1.20 in rental premium which would offset any loss made on the fall in price. We own 200 stocks, so we received $240 straight into our account. Then just rent then out again the next month. It’s that easy. The next month, you might rent them out for $20 and get a premium of 90c. That’s a total premium of $2.10 for 2 months or put another way it’s $420 for 2 months trading. If the price then went up to $20 you would have to sell your stocks, but you would be doing so with another 3c profit per stock. So, to add that all up, you would receive a total of $426 for the trade. That’s still a return of 10% for the 2 months, even when the price of the stock went down. If it didn’t go back up to $20 then you would just rent them out again.

2. The stock price goes down a LOT…
The stock price going down is obviously the worse case scenario and is really the only time we can lose money if not handled correctly. To be a long term investor you need to think about the future and that means preserving your capital. This is this single most important rule in trading. You don’t want to be spending years building up a nice little trading account, only to give it back on a few unlucky trades. That sounds like a night at the casino’s if you ask me. Imagine if you had bought $20,000 worth of stocks and the price fell to 20-30% of it’s original value. Really imagine how that would make you feel.
Now, what if I was to tell you that we could remove that risk and minimize our potential loss…..

In the next post, I will reveal exactly how to protect yourself in a Bearish market.

Happy trading!

Regards,

Stuart Ginbey

We also bought the stock for $19.97 and if we have just sold them for $20.50, then we have made a 53c profit, plus the price of our original premium.
That’s 200 stocks x 53c = $106
Plus
Rental premium of $240
Total profit for 4 weeks equals $346

That equates to a return of 8.7% for the month.

Of course, we now don’t have any stock left, so we simply start again from scratch by purchasing some more stock (either the same company or different) and renting them out again.

In the next post, we’ll have a look at what happens, if the stock price goes down. It’s no-where near as bad as what you might think.

Until then,

Stuart Ginbey

www.planetwealth.co.uk

There are generally only three things that can happen to the price of XYZ:
Scenario 1: Stock Price stays the same
Scenario 2: Stock Price goes up
Scenario 3: Stock Price goes down

Let’s look at each scenario separately…

Scenario 1: Stock Price stays the same
This is what we term ‘trending sideways’. When the price continually goes up or down, but only by a small amount. Lets say that by the end of the rental period, the stock price is $20.10 ie below the rental price of $20.50. We have already received the rental premium from when we first started the trade and we still own the 200 XYZ stocks. So we simply rent them out again and receive another premium for the next 4 weeks. If the stock continues to stay the same then we just do it over and over again. Month after month, you will receive money in your account. As easy as that! If you received the same premium each time (it will change) that would be a 6% return every month.

Normally, when the stockmarket is flat and not moving in either direction, it’s very difficult to make money. However, the Renting Stocks strategy is a great way to generate a regular income – when the market is flat.

To find out more about this incredible strategy, please click on the link below, download the E Books and you can get started straight away.

Renting US Stocks Strategy

Renting Australian Shares Strategy

Remember, this strategy can be done on any market!

These video require the latest version of flash:

To find out more information, please click on one of the links below.

Renting US Stocks

Renting Australian Shares

Here is an example to show you how it’s done.

XYZ is trading at $19.97 and lets say we own 200 stocks.
Therefore the cost to purchase the stocks =$3,994
We want to rent them out, so we write a covered call on 200 XYZ stocks
1. Say we choose an exercise price of $20.50 to expire in 4 weeks time
Lets say the premium is $1.20c per stock.
We would automatically be paid $240 into our account. (200×1.20c=240)

This may not sound like much,yet, but how would that look if you had 2000 stocks? And for only 4 weeks.

So, what do you need to do?
2. Call your broker and say: I want to write a covered call on XYZ with an exercise price of $20.50, with a January expiry and a premium of $1.20c.

You have just spent 3 minutes on the phone and received $240 into your account.

This can also be diversified across different stocks that you may already own.

So that’s the basics of the trade. Just to re-cap:

1. Choose and buy stocks

2.Choose a Rental Price

3. Choose a Rental Period

4. Rent them out and receive Rental Payment in Advance

Stay tuned and we will find out what happens at the end of September.

Starting Bank : $70,000

Trades : 6

Capital Protection : 80%

Income : $9,030

Return on Investment : 12.9%

All Ords : -7.8%

So, even when the All Ords were down 7.8%, Planet Wealth were able to make a profit of 12.9% using just this one strategy. Using $70,000, they were able to make $9,030 net profit FOR THE MONTH. But can they do it consistantly, month after month. Well history shows us that YES THEY CAN. Now I’m not sure about you, but making nearly $10,000 per month would certainly make you wonder why on earth you have to go to work. Here is a strategy, that could help you give up your day job.

Did you know?

If you had a $50,000 trading bank, which made 5% per month, then with the effect of compound interest, in 10 years time, your bank account would be worth $17,445,599. What this means is that you don’t need to be making massive amounts of money each month and with a relatively small account, you can provide a financially secure retirement for the rest of your days. Imagine being set up for life!

Another benefit to Planet Wealth is what they call the ‘Autotrader‘ Service. This is where Andrew Dimitri’s (Planet Wealth Founder) own personal trades are copied directly into your account. There is literally nothing for you to do. It is all done automatically. How easy is that?

Planet Wealth are also, so confident that this strategy will work, that they are giving a 100% money back guarantee on your subscription fee, if after 12 months, you have not made a substantial profit.

We won’t go into too much detail in this post, but if you are super keen to find out more information about this incredible strategy, then go to ‘Renting Shares in the Australian Market‘ or ‘Renting Stocks in the US Market‘. In the mean time, stay tuned and we will reveal exactly how this strategy works and why it is so effective in this current market.