Building Wealth At times, Las Vegas mystifies me.
Last September, Stansberry Research held our annual meeting for Alliance Members at the Aria Resort. I spent a few days there, mingling with readers and the financial heavy-hitters that spoke across three days.
I've been to Las Vegas dozens of times now, but there's a major part of it that I just don't get... the game of chance.
Seeing a show and having a great dinner make sense to me. And I'd be lying if I said I never wagered a few bucks on games involving skill and strategy – like poker.
But to risk your money on essentially a random twist of fate? No thanks.
When you step up to the roulette wheel, every choice is as good (or bad) as every other. Press a button on the slot machine and cross your fingers. Where's the challenge in that?
And yet, they've built a city in the desert studded with dozens of colossal palaces that attract more than 42 million visitors a year... most of whom are eager to "lay some money on the line."
Of course, Wall Street is an even bigger enterprise built on the draw people feel towards gambling.
Once investors or traders put their cash into a stock, there's little they can do but sit and watch. If that stock goes up, you win. If it goes down, you lose.
You can gain an edge with insight or analysis, but your capital is at the mercy of the markets.
Last summer, Andy Hall, known as the "Oil God," shut down his oil-trading hedge fund.
Hall had been trading on oil prices since the 1970s. During the financial crisis, he earned a $100 million bonus trading oil for Citigroup. After that, he struck out on his own.
But more recently, Hall has suffered a tough run... As oil prices have dropped lower and lower from 2014, Hall remained bullish. His fund lost 30% in just the first half of 2017, and he called it quits.
Hall is undoubtedly a smart guy with unique insights. Whatever his method of analysis, it earned him profits for decades. But in the end, he still had to get the price of oil right. He put his – or rather his clients' – money on the line and hoped that oil moved in the direction that he foresaw.
I'd much rather find a "heads I win, tails I win more" strategy for making money in the markets. That's why I use options to widen the range of possibilities.
In my trading service, Retirement Trader, we don't bet and hope. We change the rules of the game. Instead of sitting down to play by the casino's rules, we negotiate our own terms, in our favor.
Here's how it breaks down...
If the stock goes up, we win. But we also win if the stock stays flat.
That makes a tremendous difference in our win rate and returns. Think about all the time and money Wall Street spends trying to pick stocks that will rise. Meanwhile, by selling a few options, we've doubled or tripled the universe of profitable outcomes.
We can find stocks that'll go up. And we can use stocks that, in our view, "won't go down."
We've got more advantages. Since we sell options and generate income, we can even be profitable with stocks that fall a small amount.
The range of investments we can use with our option-selling strategy is massive. And we don't just "buy and hope" that our stocks go up. We use the tools in our toolbox to triple, in a sense, our chances for a profitable outcome.
Were this Las Vegas, we wouldn't be the gamblers... We'd be the house.
One of My Favorite Trading Tools
There's another tool you can use to give yourself an even greater advantage... sector exchange-traded funds (ETFs).
While we love trading on individual stocks, these funds offer four advantages that lead us to usually have one or two in our portfolio...
First, broad sector trends can be easy to spot. Nearly anyone can see that technology is playing a bigger role in our lives, or that health care spending is rising as Americans age.
By using sector funds, we can make bets on those big trends and turn those simple insights into profits.
Second, the funds provide diversification that protects us from the surprise of a single bad earnings report, lawsuit, CEO defection, cyberattack, or any of the dozens of unpredictable events that can ding a stock price. By holding a basket of dozens of stocks, we have much less to worry about.
This diversification means these funds have less volatility, and we use that to our advantage.
Third, the high trading volume and simplicity of these funds make them easy trades for new option traders to get started with. If you haven't made a trade yet, a sector fund makes for a great kickoff.
And fourth, unlike some of the high-priced stocks today, sector funds tend to maintain reasonable share prices and allow option traders to work with less capital.
If you wanted to trade 100 shares of Apple (AAPL) at $180 per share, Facebook (FB) at $182, or Alphabet (GOOGL) at $1,140, you've got to put up a lot of capital.
Meanwhile, one of my favorite ETFs, the Technology Select Sector SPDR Fund (XLK) holds all those stocks and trades for just around $70 a share.
In Retirement Trader, I've showed readers how to use my personal option strategy to earn profits on ETFs 67 times.
Click here to learn more about boosting your portfolio returns with the Eifrig Income Method.
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What We're Reading...
- Did you miss it? My favorite strategy to lower risk and boost returns.
- Something different: Can your office's March Madness bracket win you $1 million a year for life? Warren Buffett's does.
Here's to our health, wealth, and a great retirement,
Dr. David Eifrig and the Health & Wealth Bulletin Research Team
Freiburg, Germany
March 14, 2018