Get Rich - Stay Rich - Investing for Monthly Income

How to Get a 40% Annual Yield for Monthly Income

As income investors, we are constantly seeking investments to secure income for our portfolios. The majority seek dividend through income stocks. At Get Rich Investments, we suggest a healthy dose of stocks that pay monthly dividends. In such a low yield world, these investments offering monthly dividends can prove to diversify your income opportunities. There is also an opportunity to earn a high call yield to produce a significant amount of monthly income.

What is call yield and how does it differ from a dividend yield. In typical income investing, an investor may purchase a stock that pays an annual dividend such as a 3-5% yield. In comparison, the income investor may enter a trade using a covered call strategy. This trade is based on the investor owning 100 shares of stock for each call option sold. The investor receives a premium (income) for each option sold against their stock. The premium income forms the call yield based on the premium divided by the cost of stock.

Let’s look at an example subscribers to our Monthly Income Newsletter invested in during 2019. The stock was Starbucks Coffee (SBUX) that was purchased in January 2019 at $61.30 per share. The total investment for 100 shares would have cost the investor $6,130; and is the denominator of the call yield. Then, each month January through November expiration a front month call option was sold for income. The total amount of call premium income during this period is $2,350 or $214 per month. To calculate the call yield, you divided the $2,350 in call premium by the total cost ($6,130) for 38.3%!

Now hold the farm, this strategy created a 38% call yield! Where can you achieve this amount of dividend yield in such a low yield market without something like a startup-type risk?

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In comparison, if you were just a stockholder you would have received $144 in dividends for a 2.3% dividend yield. By using the covered call strategy, you achieved a 40.6% yield combining the call yield (38.3%) and the dividend yield (2.3%). You should keep in mind this is over 11 months of a covered call strategy.

As a covered call investor, you can place this type of trade on most stocks in the market. I suggest focusing on blue chip type of stocks. Subscribers are engaged with around 10 of these trades and also trade other covered calls on a monthly basis.

There are additional benefits to using this strategy beyond the high call yield. Recently, SBUX was trading at $86.00 per share that created a capital appreciation of a little over $2,400 for this investment.

The covered call strategy creates some downside protection if the stock price has a temporary pull back based on market trading.

In conclusion, income investors should add the covered call strategy to their portfolio to supplement other income investments. It is prudent to not only create multiple streams of income but also diversify your investing strategies across your total portfolio. If low yield have you down, look to a consistent covered call strategy to create a high call yield. Here’s to the next 40% or better income yield.

Understanding Option Premiums for Income

Option Premiums

The premium is the price paid or received for an option. Options are traded much like stocks, with bid and ask prices shown:

  • Seller generally receives the bid price
  • Buyer generally pays the asked price

 

  • Market maker makes or specialist keeps the spread between the bid and ask prices.

An example: A stock is trading at $40, and the October Call prices are quoted as follows:

BID = $1.70 ASK = $1.80

This means the high bidder will pay $1.70 and the lowest price offered to the buyer is $1.80. Note the $0.10 spread between the two prices. Actually, the only time the seller can be assured of getting the bid price, or the buyer only the asked price, is to enter a trade order as a market order, at which they get the market price at the time the order is executed. Market makers have to execute a market order at market price, up to the number of contracts for which the bid or offer is good, but are not obligated to take limit orders. By using the limit order, the seller might get the $1.75 or $1.80 for writing the call. And the buyer can enter a limit order for less than $1.80 such as $1.70 in an attempt to buy the call at a cheaper price.

Historically, the premium referred to the total amount received for selling the contract, not to the option price. Today the term “premium” simply means the options price on a per share basis. That is, the premium shown is bid at $1.70 that means $1.70 per share; you would expect to receive $170 ($1.70 X 100) for an entire option contract related to 100 shares. The premium can be all intrinsic value, all time value or contain both.

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Understanding Option Exercise and Assignment

Exercise and Assignment

When a stock option is exercised, the call holder buys the stock, and the put holder sells the stock. When options are exercised, the OCC decides to which brokerage firm the exercise will be assigned, and the brokerage in turn decides which customer will get the assignment. When we are assigned an exercise and are required to sell our shares, the shares sold are said to have been called out or called away. Assignment occurs, then the shares are called out. Assignment on a short puts means purchasing the stock.

Assignment is completely random, and an exercise can be assigned to and appointed among several different call writers. Once assignment by OCC occurs, settlement between the buying and selling parties is automatic. Shares must be physically delivered once exercise occurs. The covered call writer doesn’t have to do anything; the call writer’s broker handles settlement, delivers the shares and collects the exercise funds. Option exercise or assignment can be partial: one can exercise less than all options held. Conversely, you may be assigned on less than all of your short calls or puts. However, one cannot exercise or be assigned on part of a single option contract. If you buy a call (put), you are not required to buy (sell) the underlying stock: you may sell the option to close or allow it to expire worthless.

Automatic Exercise

The OCC automatically exercises options that are $0.01 or more ITM, unless the option holder has notified their broker not to allow exercise of the option. Note that a stock’s price can tick up or down after the close on expiration Friday, resulting in calls or puts (but not both calls and puts) that were near the money at Friday’s close becoming in the money – and being exercised.

If you are long calls on expiration Friday, you could find yourself purchasing shares unexpectedly, due to a late-day or after market tick up in the stock. Or if instead long the puts, then, you might find yourself selling shares unexpectedly: and if you don’t own the underlying shares, this would either create a short stock position in your account, or your broker would buy you in (purchase the shares on your behalf) in order to cover itself. Be sure your broker knows your intention if you are long options at expiration and have nor closed them. Writers of short calls and puts can similarly find themselves assigned an exercise due to the same mechanism.

Early Exercise

Because stock options are American-style, you can be assigned as exercise any time an option is in the money, although options typically are not exercised early while there is still time value remaining. The reason is that the exercise of an option forfeits its time value; to capture the time value it is necessary to flip (sell) the option. But as expiration draws near, options that are in the money sometimes trade at parity, and this is when early exercise occurs. Options trading below parity practically beg arbitrageurs to exercise them for risk-less profit.

Where Stock Options Go

Option traders say that only 10% of options are exercised, which is generally true but not in all cases. Thus if you write a call, the odds against assignment are roughly 9:1, statistically speaking. But if a call is written ITM, the odds are quite high it will be exercised, despite the overall 9:1 odds. No matter where written originally, if the calls are in the money $0.01 or more at expiration, exercise is a virtual certainty. ATM and OTM options are never exercised, since it is cheaper to buy or sell stock in the open market than to exercise an option.

You have probably heard option seller’s state they are right 90% of the trades. This is due to only 10% or so being assigned. There is more to this story as we continue this journey.

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Do You Know “Moneyness” in Options Trading

Moneyness: Option Strike Prices

Stock option strike prices fall into the three categories, depending on their relationship to the stock’s price (known as the “money”). This relationship to the “money” is known as moneyness.

  • In the money (ITM)

 

    • At the money (ATM) – this is used to refer to options near but not exactly at the money
  • Out of the money (OTM)

 

CALLS Strike Price PUTS
Strike below stock price ITM Strike above stock price
Strike same as stock price ATM Strike same as stock price
Strike above stock OTM Strike below stock

 

The purpose of the two tables below is to illustrate the relationship of different call and put strikes to the money and how these relationships change as the stock price moves. Notice how strike price “intrinsic” refers to the amount of the premium is in the money.

Moneyness – Stock Price is $20.78
CALLS PUTS
Relative to Strike Amount ITM Strike Amount ITM Relative to Strike
ITM $3.28 17.50 $0.00 OTM
ITM $0.78 20.00 $0.00 OTM
20.78
OTM $0.00 22.50 $1.72 ITM
OTM $0.00 25.00 $4.22 ITM

 

At $20.78, two of the call strikes are ITM and two are OTM. Same for the puts; two are ITM and two are OTM. But notice when the price drops to $17, all four call strikes become OTM and all four put strikes are ITM. This is based solely on the movement of the strike price.

Moneyness – Stock Price is $17.00
CALLS PUTS
Relative to Strike Amount ITM Strike Amount ITM Relative to Strike
OTM $0.00 17.50 $0.50 ITM
OTM $0.00 20.00 $3.00 ITM
20.78
OTM $0.00 22.50 $5.50 ITM
OTM $0.00 25.00 $8.00 ITM

Options that are $0.50 or so of the stock price and thus slightly ITM or OTM, frequently are referred to as near the money (or NTM) options. The term “at the money” also is used to refer to NTM options.

Understanding the moneyness of the call option is important, because then you only need to remember that the moneyness of the put is the opposite, ITM and OTM.

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Stocks and Options: Similarities and Differences

Many investors ask about the fundamentals of options and the difference between types of options. Here I share some background on the fundamentals of option trading. Bonus: An active option trade is shown below for our Covered Call of the Week.

There are both similarities and differences between stocks and options. Some think of options as a stock substitute which is correct in some cases. However, it is important to know the differences as you include both in your investing plan.

Similarities:

  • Stocks and options are both securities. Options are technically derivatives since they relate to another security: shares of stock.
  • Stocks are traded on exchanges and also over-the-counter. Stock options trade only on exchanges regulated by the SEC.
  • Market makers buy and sell stock options as they do stocks.

Differences:

  • Stock represent an equity ownership interest in the company. An option is a contract.
  • Options expire on their respective expiration dates. An option not exercised by its expiration date expires worthless. Stocks never expire except when a company goes out of business.
  • Stocks are represented by stock certificates, although buyers often don’t see the shares because they are held in the broker’s street name. But options are maintained in the form of electronic book entry only, and there are no certificates that represent options.
  • At any time, there is a fixed number of shares of stock outstanding. However, there is no limit to the number of option contracts that can be created on a stock.
  • Holders of stock have the right to vote and receive dividends, but holders of options have neither, since the option is only a contract to buy or sell.

COVERED CALL TRADE OF THE WEEK

KKR & Co. (KKR)

The KKR Oct 25, 2019 covered call with a $27.50 strike price (selling at $0.85) could potentially yield a 3.89% return if KKR stays above $27.50 a share at expiration 26 days from now. The covered call has a 3 Key (Moderate Relative Risk) ranking. On 07/26/19, Argus Research set a $31.00 12-Month price target for KKR, which is currently trading at $3.68 below that target. By using this covered call strategy potential returns may be higher than simply holding the stock if KKR stays below $28.38 through Oct 25, 2019. The covered call strategy offers limited protection if the stock drops in price, but if the stock goes below $26.47 expect losses.

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Get the book on Amazon – Passive Income Monthly Plan: Create 60 Paychecks in 90 DaysLearn to create 60 paychecks per month in passive income. It’s simple – get started with $5 to build unlimited income. One of the truly passive income opportunities for monthly income – month after month!

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How to Create 60 Paycheck Every Month

To achieve financial independence, you must create multiple income streams to replace earned income. Warren Buffett states “You will work the rest of your life if you don’t make money while you sleep.” There is a simple method to position yourself for unlimited passive income. Now, the recently released book , “Passive Income Monthly Plan: Create 60 Paychecks in 90 Days” lays out a plan anyone can achieve regardless of where you may be at the starting line.

Obtaining Extra Income is Absolutely Critical in Modern Day America

If you’re looking to get extra income… there is simply no need to get a part-time job. It’s much easier than that. The KEY to making money is tapping into multiple sources of income.

Once the extra money starts flowing… you can afford to live the way you want.

… you can take that dream vacation, buy that new house… or finally afford to start a family.

In other words, you won’t ever have to worry about the financial security of you or your family again.

The real trick is to make your money work for you!

The Book will show you how to:

  • Literally setup 60 monthly dividend stocks that will pay you each month – 720 checks per year! You can grow these dividends over time – Unlimited Income – to achieve early retirement on your terms;
  • Show you how to get stated with as little as $5 in new stock accounts that charge no commissions with no account limits;
  • Diversify your portfolio to be safe when the market goes into a downturn such as a recession or other market crisis – you continue to make monthly income regardless of market volatility;
  • Create a 15% saving account as no recommended monthly dividend stock has an annual yield below 10% – with the average across all investments at 15% – where else can you make this much income?
  • How to eliminate longevity risk – never outlive your money – your money will continue to increase your income to not only surpass inflation but grow in perpetuity;
  • Leave a life legacy to be passed on to your loved ones like the Rockefellers and other wealthy families have done throughout history.

The Passive Income Monthly Plan is a landmark publication that will change many lives. There is endless discussion and schemes online to suggest you can take over the world by writing articles, making Youtube videos and such. This book gets straight to the point with concise “how to” directions in a single sitting.

Get started today as the book is at a special price on Amazon Kindle. Click here to visit the listing: “Passive Income Monthly Plan: Create 60 Paychecks in 90 Days

To learn more about creating multiple streams of passive incomes, visit the website: passiveincomemonthlyplan.com for a free subscription.

Back to Warren Buffett – make money while you sleep – with this plan.

How to Trade Options Primer

Many investors ask about the terminology of options and the difference between types of options. Here I share some background o the fundamentals of option trading. Bonus: An active option trade is shown below for our Covered Call of the Week.

An option is a standardized contract originated by the Options Clearing Corporation (OCC) that is exchange listed. A stock option is the legal right, but not obligation, to buy (calls) or sell (puts) shares of a specific stock, which is known as the underlying stock, for a fixed time and a fixed price. Stock options have two main characteristics:

Fixed Price: an option give the holder the right to buy or sell at a fixed price. This price is known as an exercise price or strike price (or just “strike”).

Limited Life: an option is good for only a specific period of time, then expires. If it expires without being exercised, it is said to “expire worthless.”

The Two Types of Options

There are two types of options to be used in your option strategy for various trades based on the prediction of the investor.

Calls: the right, but not the obligation, to buy the underlying stock.

Puts: The right, but not the obligation, to sell the underlying stock.

Buying and Selling Options Primer

ACTION

STATUS

CALL OPTION

PUT OPTION

Buy

Long

Holder has the right but not the obligation to buy 100 shares

Holder has the right but not the obligation to sell 100 shares

Sell

Short

Seller has the obligation tosell 100 shares if calls are exercised

Seller has the obligation to buy 100 shares if puts are exercised

Underlying Stock – these are the shares of stock that underlie (are subject to) a stock option. The underlying stock also can be an Exchange-Traded Fund (ETF) instead of a stock.

Option Contract – each exchange-listed call or put contract normally covers 100 shares. The only exception would be for a stock or reverse split, merger or other corporate recapitalization, which can result in an adjustment to the terms of an option contracts. There are over-the-counter options, but they are a different subject and not covered in this article.

Option Trading – standardized options contracts are exchange-listed and traded on the different U.S. option exchanges.

Expiration – stock options (equity options) expire on the Saturday following the 3rd Friday of each month and that Friday is the last day on which those options can trade. If the 3rd Friday is a holiday, the last trading day will be the Thursday before. Some brokerage firms institute a Friday deadline for notice of exercise by retail customers so be clear on whether you can exercise options on expiration day. Be aware that options you have sold can be exercised on expiration day.

Option Term – stock options have a life of 9 months or less unless they are LEAP options with a much longer life, up to three years. At the end of the term, the option expires.

Open Interest – the number of contracts of an option series outstanding. A proxy for how much interest among investors in this contract.

There is no risk that upon exercise of an option the other side will fail to perform. The OCC, the world’s largest clearing organization for options, processes all sales of put and call options and all option exercises. The OCC acts as the guarantor of every option transaction to ensure there are no option defaults.

In fact, there has never been a default in buying or selling shares upon call or put exercise, for this very reason. The OCC does not guarantee anyone a profit, however, only that shares will be bought (sold) upon call (put) exercise. Note that buyers and sellers of options do not form a contract with each other, there contract is with the OCC, which is the true counterparty to the option buyer or seller.

COVERED CALL of the WEEK

Covered Call on Baker Hughes (BHGE) 

STRATEGY: The BHGE Sep 20, 2019 covered call with a $21.00 strike price could potentially yield a 4.69% return if BHGE stays above $21.00 a share at expiration 33 days from now. The return covered call has a 3 Key (Moderate Relative Risk) ranking while the diagonal spread has a riskier 2 Key (Considerable Relative Risk) ranking. On 08/05/19, Argus Research set a $30.00 12-Month price target for BHGE, which is currently trading at $8.94 below that target. By using this covered call strategy potential returns may be higher than simply holding the stock if BHGE stays below $22.05 through Sep 20, 2019. The covered call strategy offers limited protection if the stock drops in price, but if the stock goes below $20.06 expect losses.

CHART: the RSI is below 30. It could either mean that the stock is in a lasting downtrend or just oversold and therefore bound to retrace (look for bullish divergence in this case). The MACD is below its signal line and negative. The configuration is negative. Moreover, the share stands below its 20 and 50 day MA (respectively at 23.89 and 23.99). Finally, Baker Hughes a GE Company is trading below its lower daily Bollinger band (standing at 21.76) so expect a rebound. Baker Hughes a GE Company is currently trading near its 52 week low at 20.09 reached on 26/12/18.

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Covered Calls for Life

How do you measure the financial health of a business or public company? They are measured by the amount of cash flow they produce. All investors understand this concept as this leads to the earnings reported and financial strength of the company. Covered call investing provides a large amount of cash flow.

There are several styles of covered call writing. Some investors never do more than write calls on their portfolio stocks that can be an art within itself. Many investors buy stocks for the express purpose of writing covered calls on them and then sell the stocks or let them be called away at expiration. There are covered call strategies for the active trader who seeks action, for the shoot for the moon directional trader, for the lazy writer and for those with a long-tern horizon. Then the conservative crowd are fearful of risk and seeking low-risk or limited-risk trades.

As an investor, you can have covered call your way. No matter your lifestyle, if you have a computer or smart phone, there is a covered call strategy that will work for you. Is it riskless? No – but there are ways to lower your risk in the trade like insuring the trade.

If you are an investor interested in creating income streams. Then, covered call writing should be part of your portfolio.  You can write calls against your dividend stocks to enhance your income. I like to think about covered call writing as a monthly income stream.

I can sell a call option each month on a stock I own. This premium income is automatically deposited into my account at the transaction completion. Now, do this every month for a year. Then, add up the amount of the premium income for the 12 months and divide it by the purchase price of the stock. Compare this calculated covered call yield to the stock dividend yield. Which is higher? Typically, the stock dividend yield may be 3-5% but the covered call yield will be 15-20% yield.

For an income investor, a call yield this high is a great stream of income and it provides some downside price protection. Using the “rule of 72” will result in doubling your investment in 3.5 years. Even better, you can add $1,000s of income each month to a medium size portfolio.

The theory of covered call writing explained here should catch the eye of the income investor. This clearly shows why covered call should be a lifestyle-making portion of your investments. We like to say Covered Calls for Life is where it is at for multiple streams of income.

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Covered Calls for Income Investing

Why don’t more people write covered calls? There are numerous reasons. The general population is unaware such an investment exists. Only a hand full of investing services promote them but popularity has increased as more brokers push option trading strategies these days. Also, they do require a level of education to learn them in depth. The popularity increase has moved covered calls by leaps and bounds as it should. This is moving investing to the next level which is income investing.

Many financial advisors, brokers, planners and others in the finance industry either are not comfortable with covered calls or simple don’t understand the opportunity for covered calls in their clients’ portfolios. Many advisors are fee based and accept sizable commissions from funds to recommend their products. They make extra money when you buy these paid recommendations in place of a strategy such as covered calls. Basically, covered calls are just not on their priority list.

The information disseminated about covered calls by advisors and websites who don’t know the theory behind covered calls tend to paint the strategy as being dangerous with little return for the risk taken. Then, these same advisors recommend you to hold low performing stocks or churn your account to increase commissions. If they used covered call writing on the buy and hold stocks it would generate income that will lower overall risk of the investment.

How can producing income from an asset increase the inherent risk of owning an asset? This argument against covered call is nonsense on the face. For example, a real estate developer is usually wiling to hold properties that generate positive cash flow. If they don’t cash flow, then you have a tax write off and a hope to sale at a higher valuation – sounds like buy and hold right!  Advisors recommend buying stock and funds based on commissions. If you are in the hammer business, everything looks like a nail.

Brokers fear liability when customers lose money, even on self-directed option trades and they make little on option trades.  The education of clients on options will increase the risk of them deflecting to discount option brokers online once they feel comfortable with covered calls.

You can’t blame the financial industry for doing what is in their best economic interest any more than in other industries such as plumbers, electricians and other trades. Just recognize your interest are different than the financial industry in terms of your long-term investing. Advisors make money when you do and they make money when you don’t. Your choice is to rely upon their advice or handle your own investing. What should you do?

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Here is a great quote from the greatest options expert Larry McMillan: “You will have to predict something in order to profit, for only market makers and arbitrageurs can construct totally risk-free trades that exceed the risk-free rate of return.”  Regardless of your style, stock picking or options trading, you must make choices and you must predict outcomes.

At Get Rich Investments, we believe covered calls do require a prediction but they lower the overall risk of investing. They produce premium income to offset some downside in stock price movement. If used with dividend stocks, they add another layer of income. Then, we couple a portion of our portfolio to monthly dividend stocks to lower portfolio volatility and risk while maximizing total portfolio income.

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Why Buy and Hold Investing Doesn’t Work for All

If you are starting your investing journey than you should consider the best methodology to achieve your objectives. Some popular theories include John Bogle suggesting to buy 50% in a stock index and 50% in a bond index. This is a set and forget move that only requires periodic rebalancing. I am sure this works for many investors. Then, there is the buy stocks for the long haul like Warren Buffett and others to let them appreciate in value and grow dividends over the lifetime of your portfolio.  Most investors subscribe to this theory for managing their investments. I prefer to more actively manage my portfolio and focus on multiple steams of income.

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You may have heard the old adage that the best way to make a small fortune is to invest a large fortune. Another one is that the most difficult time to invest is always now. Mark Twain famously considered every month of the year was peculiarly dangerous for investing in stocks. And there is the wall is a thoroughfare that begins in a graveyard and ends in a river.

Sometimes Wall Street analysts urge the public to buy stocks they know are poor investments as they are probably selling in private deals. Insiders can play games using their superior information because they hold insurmountable advantages. Even Jim Cramer has acknowledged how easily stocks are manipulated by big-time money managers.

To some, this theory is referred to as buy and hope.

As you learned from the past two decades, stocks don’t always go up. Remember the market downturn not so many years ago. Some people buy stocks at the end of a bull market after listening to the crowd full of bull market stories for years only to watch their stocks for years through a bear market. If you are in your 30’s this may not be a concern. But if you are approaching middle age or retirement, do you have time to wait out a secular bear market?

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The market went up an average of 8-9% in the last century but the key word here is this is an average. There have been periods of time when stocks turned in negative returns for several years. I know retirees who had their portfolio cut in half by market corrections. At that age, you no longer have the wherewithal to make earnings via working. A history lesson in it toke 20 years for the market to make gains after 1966. The latest bull market is being fueled by those prepping for retirement but eventually they will spend those dollars during retirement. You know what this means for the market.

Picking stocks that will last a lifetime to grow in value and appreciate in price is tough. We had debacles such as Enron and others and today bell weathers such as GE are in trouble. Yet to get rich in these stocks the security must perform well in all areas. Most of these stock picks are based on the fundamentals of the stock. However, there are many factors that affect long-term success such as changes in technology and markets. I am thinking of Amazon, Google, Facebook, Netflix and others. Where have all the books stores gone? Who was the major search engine before Google? Why are brick and mortar retailors going away because we shop on Amazon?

In general, buy and hold does not produce income. Stocks just lying around the portfolio doesn’t produce any cash flow unless they pay dividends. Growth stocks that are likely your home run stocks usually don’t pay dividends. If you asked a successful entrepreneur their opinion of tying up precious cash in a non-producing investment for years with the risk of a bear market, what will they say? They will probably tell you it is all about the cash flow. When income is not being produced, you are hoping stocks will increase enough over time to produce wealth.

The buy and hold investing ties up your capital without producing income to use in your life. If stocks are higher, then you can sell them, take gains and access the money. But if stocks are down, you are digging into your capital in order to get your hands on some cash. And it is all because stocks are not producing income.

Then there is the value investors. You know them, they buy low and sell high to capture the true value of the stock. Generally, the market moves all boats and your value investment will likely flow with the tide. Value is a relative term based on the perception of the assets as all do not agree on the correct value. Therefore, you had better be right if you are a value investor. Some stocks may be value plays for years!

Wall Street tends to be traders so they don’t do buy and hold investing but you are listening to their recommendations. Odd that Wall Street would tout a strategy they don’t follow themselves. There no mystery that Wall Street needs buyers for stocks. They turn their money generating cash flow all the time. Shouldn’t you?

Remember seeing two market crashes with one in 2000 and the next in 2007 with a span of 10 years. Some investors were ruined twice within a decade. With stocks at all-time highs, when will the next crash happen? Are you prepared to protect your capital?

The smartest strategy would be to buy stocks that pay dividends at the market bottom in 2009. You get the market rebound and cash flow from income. You may have picked up yields of 5% or more during this period.

Then, the best approach would be writing calls on your portfolio stocks to generate more income. A declining market is a perfect time to write calls on a long-term holding. The stocks are declining anyway so why not produce income out of them?

Instead of buy and hope investing, you should try income investing using a conservative approach that can produce an average monthly return of 3-5% which builds wealth quickly using dividend stocks. Think about it, you get dividends from the stock and premium income from writing covered calls.

Imagine that: you can force a stock to generate excellent income – paying you rent – while defining and limiting risk at the outset. And you can choose how much risk to undertake.

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