ETR: Don't Gamble

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Issue No. 3007 - $1.00	Wednesday, April 14, 2010
What's Your Investing Style? By Jason Holland In his essay today, Investor's Daily Edge Investment Director Bob Irish reveals that one of the supposedly "safest" and most conservative investing strategies... is actually quite risky. --------------------------------------------------Highly Recommended -------------------------------------------------- Get Michael Masterson's Bestselling Book, Ready, Fire, Aim... for Free Ready, Fire, Aim is considered a business-building bible by countless readers of this New York Times, Wall Street Journal, and Business Week bestseller. "If you're thinking about starting a business, don't -- until you've finished reading this book. It will save you thousands of dollars and years of time and effort," says Scott Martineau, founder and CEO of ConsciousOne.com. And Brent Jones, founder of Affinity Lifestyles, says, "I am going to grow my company to over $100 million! Now I know I can do it. I have a clear roadmap." Ready, Fire, Aim contains the secret blueprint that Michael used to craft not one... but TWO $100 million+ business empires... And now this breakthrough business book is available totally free to readers of Early to Rise... Find out more here. "In gambling, the many must lose in order that the few may win." George Bernard Shaw Don't Gamble By Bob Irish "Don't gamble; take all your savings and buy some good stock and hold it till it goes up, then sell it. If it don't go up, don't buy it." Will Rogers's observation on the stock market is as true today as it was over 70 years ago. It speaks to the type of investing most people are familiar with. Buy and hold. That is, buying a stock and waiting for it to go up in price. What most buy and hold investors don't know is that this is one of the riskier ways to participate in the growth of a company. Today, we're going to look at an approach that has less risk and can deliver big returns on a smaller investment. The Magic of Options Just the word "options" turns a lot of investors off. The arcane terms used in this market can be off-putting. In the money, out of the money, covered calls, naked puts -- just to name a few -- send many running for the exit. To the uninitiated, it sounds downright reckless. It's not. In its simplest form, options limit your downside and can increase your upside. A Comparison When you use options to invest in a company, your reasons should be the same as when buying stock. In other words, you look for a company you have confidence in. It should be selling at a reasonable valuation. And it should benefit from powerful long-term trends. The only difference is that instead of buying the underlying stock, you buy an options contract. It's really that simple. Let's compare. Buying the Stock Let's say you want to invest in ABC Company. It's selling for $10 a share. You buy 100 shares for a total investment of $1,000. Now let's assume the stock goes up -- to $12 a share. You sell your 100 shares and realize a profit of $200. That's a 20 percent return. Go out to dinner and order a good bottle of wine. Buying the Option Instead of buying the stock, you buy 10 call option contracts on ABC Company -- betting that the price of the underlying stock will go up. Each contract controls 100 shares at a cost of $100 per contract. Your total investment is $1,000 ($100 x 10 contracts). The stock rises to $12. Each one of your options contracts increases in value to $300. You sell all 10 contracts. You realize a profit of $2,000. That's a 200 percent return. Go out to dinner and buy yourself a new plasma TV. Why Use Options? First, options are much cheaper than the underlying stock. So less capital is required to control a bigger position. Let's say you like Google. To buy a round lot (100 shares), you'll need over $55,000! With the option, you can control 100 shares of Google for pennies on the dollar. Next, your downside is limited to the price paid for the option. And lastly, with a small investment, you can make big returns. Can This Really Work for You? The short answer is yes -- even if you've never invested in options before. If you'd like better returns and less risk, I recommend that you try IDE's Options Power Trader service. It makes investing in options easy. Our options guru Ted Peroulakis will guide you every step of the way. What to buy. When to buy. And when to sell. Ted has just booked eight winners in a row. And he's expecting number nine in the next few days. In the last few weeks, he's taken gains like these: 30.88 percent options gains on the oil giant Chevron in 28 days, while the stock went up 5 percent in the same period 26.26 percent on Walmart calls in 37 days, while the stock went up less than 4 percent a 36.07 percent gain on the drug maker Merck in 27 days, while the stock went up 5.3 percent Keep in mind that Ted's been taking these types of gains in a market that has been going up slowly. There are even bigger winners when the markets are more volatile. Like last year. Make Your Money Work Harder In 2009, Ted booked 17 trades with gains of 100 percent or more. Seventeen! Just one of those trades beat the market for the entire year. How is 2010 shaping up? Ted sees a lot of opportunity for triple-digit winners in the next few months. Healthcare and technology are two sectors he is excited about. Ted has been successfully guiding investors for over 15 years. And he's a self-made millionaire many times over. If you'd like to know more about options and how they make your money work harder for you, click here. [Ed. Note: Bob Irish is the investment director of Early to Rise's sister publication, Investor's Daily Edge. Before coming to IDE, he enjoyed a decades-long career in the financial services industry.] --------------------------------------------------Highly Recommended -------------------------------------------------- Don't Have Any "Start-Up" Funding? It's a myth that you need venture capital or loads of your own money to start a business online. Thousands of today's most successful Internet businesses began as very small operations funded by a few hundred dollars and a great game plan. At ETR's 5 Days in July Internet Business Building Conference, we give you that game plan. "You've hit on some things." "Thank you for your great newsletters -- they always make my morning. For the last few issues, it seems like you guys have been riding on my shoulder as I walk around the office. "It seems as if you've been peeking under the covers at the company I work for. You've hit on some things I need to work on personally, and some things that need to be changed in our corporate culture. "Keep up the good work!" S.B. -----------------------------------------------------Highly Recommended ---------------------------------------------------- Are Antioxidants a Dangerous Hoax? If you're taking antioxidants by the handful, you could actually be putting your health at risk! Find out why by clicking here... What's Your Investing Style? By Stacy Berver Many companies choose to launch their direct-marketing programs online. It's relatively easily to strike joint venture deals with e-mail list owners to promote your products. But just because you started online doesn't mean you should forget traditional direct mail, especially after you've been in business for a while. Yes... it's more costly. But it's also more targeted, yielding better qualified and ultimately more profitable customers. Take Client A, for example. This company had an aging customer base and was struggling to acquire new customers, having been unable to prospect successfully for five years. As a result, their business was in a serious decline. I worked with them to develop a direct-mail program based on marketing one "hero" product (versus sending out a catalog of their entire product line), and through this prospecting effort they: Made a minimal upfront investment that was recouped within 2-3 months Mailed over 1.3 million pieces in year one Acquired nearly 16,000 new customers Added over $1.6 million in gross revenues to their bottom line Direct marketing can absolutely be cost effective if you have a knowledgeable, efficient team member or a strategic partner with strong vendor management skills. Here are some guidelines to help you figure out if it's a good fit for your business: 1. Can you identify your goal in advance? Will your product have a high enough sale price and response rate that you can recoup your marketing costs -- OR, more important, do you have other products and services that you can sell to customers after the initial sale? Many savvy direct mailers prospect knowing that they'll lose money on the initial sale, but that they'll recoup that money and much more with subsequent product sales. 2. Do you have online test results that show a strong response to your sales copy? This is not absolutely necessary, but it adds a degree of comfort when considering the added expense of direct mail. If you're unsure, look for a few joint venture e-mail lists to partner with to test your product to their lists. 3. Do you have the resources to support a direct-mail program? As I said, you'll need either a direct-mail educated team member or a knowledgeable partner. The details are critical to getting a direct-mail program off the ground successfully (and direct mail does differ in several critical areas from online marketing). 4. Is your fulfillment cost reasonable? You can't, for example, sell a book for $30, spend $15 fulfilling it, and expect to make money. It's relatively simple to run projections based upon your sale price, anticipated response, marketing and fulfillment costs to determine whether or not a product will be viable in the mail. As you think about getting started on a lucrative direct-marketing journey, be sure you check out our powerful and informative FREE report, Marketing Mastery: How to Harness the Power of Direct Marketing. Click here to claim your copy. You can also check out our new program, Marketing With the Masters. In our easy-to-read "Master's Guides," eight of the industry's experts share their knowledge, secrets, and strategies for successfully launching direct-marketing campaigns... for any business. Today's Words That Work: Erudite Erudite (ER-yoo-dite) -- from the Latin for "unformed; rough" -- is another way of saying learned or scholarly; characterized by great knowledge. Example (as used by Liesl Schillinger in a New York Times review of The Possessed: Adventures With Russian Books and the People Who Read Them by Elif Batuman: "Hilarious, wide-ranging, erudite, and memorable, The Possessed is a sui generis feast for the mind and the fancy...." We want your feedback! Let us know your thoughts on today's issue. Email us at: AskETR@ETRFeedback.com
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