Stock Market Cash Flow by Andy Tanner - (Rich Dad Advisor Series) - YouTube

the book stock market cashflow by Andy Tanner is  the first book in the Rich Dad adviser series to  

focus on the paper assets class this book is  written to help folks who are beginners or  

people who see themselves as students with room  to grow the topic of stock market investing is so  

large and ever-changing no one can know everything  about it Wall Street experts love to tell us what  

they think is best for our money but never seem to  want to teach us anything the less you understand  

about the stock market the more dependent on them  you feel choose the path of Education and all of  

its rewards be sure to watch this video to the  end to learn how warren buffett generates huge  

profits with options and how you can use the exact  same strategy please subscribe to our channel and  

like this video if you find it useful don't forget  to turn on the notification bell in order to stay  

tuned some of the things one can love about  the stock markets are stocks offer investors  

good liquidity stocks are agile there are profit  strategies for movement in any direction of the  

market up down or sideways stocks are scalable  one of the dangers of the stock market is as  

accessibility you can play the market and not  realize you don't know what you are doing don't  

confuse awareness with proficiency become a great  student have a mentor as a student of the stock  

market you'll find that everything you'll ever  learn about making money with stocks will fit  

into one of the four pillars of investing pillar  1 fundamental analysis the fundamental analysis  

helps you identify the financial strength of  an entity without ever setting foot there the  

whole story is in the numbers start by analyzing  monetary policies on the globe deficit spending  

printing money lowering interest rates central  bank's buying bonds and other securities studying  

soverign fundamentals in Europe Asia and the u.s.  helps investors get a feel for the future and  

position themselves more intelligently one of the  most important numbers in sovereign fundamental  

analysis is the debt / GDP ratio then process  with corporate fundamental analysis it helps you  

with valuation examine the financial statement  in the income statement use the numbers to see  

the value of the entity diagnosis problems and  better forecast the future the most important  

indicators are the net worth equals assets minus  liabilities and the cash flow equals income minus  

expenses by itself the price of a stock doesn't  really mean much you need to examine the price  

ratios and understand what you're paying for the  most important numbers are the P / e ratio and  

the P eg ratio P / e how much you're paying for  earnings P eg how much you're paying for earnings  

and growth the trailing P / e ratio measures the  earnings over the last 12 months where the forward  

P / e ratio projects what the fiscal year ahead  might look like now that you have the ability to  

intelligently recognize a solid asset there's only  one constraint when it comes to getting rich do  

you have the resources to see as an opportunity  what's your buying power number in other words  

how large of an asset could you buy today do a  fundamental analysis on your personal statement  

be specific about your buying power and seek to  grow that number in cash credit relationships  

or other forms of funding what is your policy  when it comes to buying power are you cutting  

expenses and living small or are you raising  expenses and spending more and asses to bring  

passive income pillar 2 technical analysis while  fundamental analysis tells us the strength of an  

entity technical analysis tells us the strength  of the market the stock market goes up based on  

supply and demand at its core you are going  to be studying about people's feelings hopes  

and fears stock charts tell the story of supply  and demand which may or may not correlate with  

fundamental analysis charts tell the story of the  investors how much are they willing to pay at the  

moment prices can move for a variety of reasons  news a rumor profit-taking short-covering or for  

no obvious reason at all the author reminds us  that charts are not a crystal ball they simply  

indicate what is likely to happen based on the  historical records of past investor behavior the  

book gets you familiar with the basic vocabulary  used in chart reading and contains analysis of the  

most common chart patterns pillar 3 cash flow the  first two pillars are about gathering information  

the third and fourth are about positioning  yourself in the market in order to make a  

profit there's always opportunity is all about  how you position yourself when you receive bad  

news you have two choices you can cry about it and  hope it changes you can position yourself to avoid  

the problems and possibly even profit from them  if you think something is going up in value you  

can enter a long position by purchasing the item  and then exit that long position by selling the  

item the beauty of the stock market is that you  can also profit when you think that the item is  

going down in value you enter a short position by  borrowing a share of stock and selling it in order  

to buy it back later at a lower price return the  share to the brokerage and pocket the difference  

short positions have their risks the stock has  no limit on the upside so potential losses are  

unlimited and could be devastating if you don't  exit on time the long-term strategy of buying and  

holding stocks or mutual funds is about hoping for  growth this may help your net worth in the long  

run if the market accommodates you but this book  is about showing you how you can gain a steady  

cash flow from the stock market so you can cover  your bills determine your monthly expense number  

most people use a job to generate the income they  need to meet that expense challenge that way of  

thinking that's what the wealthy do your monthly  expense number is you're investing goal develop  

a plan to go out and buy some stock to make $10  then $100 and then keep building your assets to  

provide you with the needed income to cover your  expense number don't forget that not all cash is  

equal in the u.s. earning income can be taxed up  to 39 percent but capital gains can only be taxed  

up to 15 to 20 percent with the right tax planning  in the right positioning you can make almost any  

income passive income and receive the maximum tax  benefit to learn more about this check rich debt  

advisor Tom wheelwrights book tax-free wealth  every investor is looking for a high return on  

his money there are two ways to increase the rate  of return the first is to have a bigger game it's  

impractical to rely on this approach since you are  somewhat at the mercy of the market the second is  

to reduce the initial investment amount if you  can find a way to reduce the initial investment  

as close to zero as possible the rate of return  can grow very large the way to do this in the  

stock market is to use leverage through buying  or selling stock options note that with options  

you gain leverage without debt it's useful to  remind ourselves just how powerful the concept  

of leverage is using it intelligently can make  life a lot easier for you Archimedes famously  

said give me a lever long enough and a fulcrum  on which to place it and I shall move the world

suppose you are looking to buy a particular  stock at $50 per share the most common path  

will be to purchase shares of the stock if you  buy 100 shares you're risk losing up to $5,000  

if the stock does poorly or the company goes  bankrupt another possibility is to buy a call  

option for that stock you start by making a few  decisions at what price do you want the choice to  

buy shares strike price how long do you want the  option to last expiration date how much will the  

contract cost option premium in the US markets  a single option contract gives you control over  

100 shares if the premium is $3.00 per share  you only have to risk $300 instead of 5,000 if  

the stock goes down you are not obligated to buy  it if the price goes up to $100 you can sell the  

actual agreement itself if you can sell it for  $5,000 you paid $300 your profit is 47 hundred  

dollars in your initial investment was only $300  you can see that with the stock option you are  

leveraging a small amount of money without using  any debt the tricky part is that option contracts  

expire and as time gets closer to the expiration  date their value shrinks therefore options have  

both time value and intrinsic value the author  goes in-depth explaining the details you need  

to know about trading options and advices to use  option contracts to accomplish any of the three  

investing goals capital gain cash flow or hedge  or any combination of the three the strategy  

mr. Tanner recommends is generating cash flow by  selling covered options this is especially useful  

in difficult markets where buy-and-hold investors  are suffering from crazy up in down conditions as  

a quick reminder an option is a promise by someone  to sell a certain stock and an agreed-upon price  

until a certain date in return receives a premium  as income this premium is not just based on the  

movement the stock price but on the movement  of time time decay works to benefit the options  

seller let's see how selling covered call options  works in practice first step is to buy 500 shares  

of XYZ stock at let's say at a hundred and forty  dollars per share and hold it for a year then  

you sell five one month call option contracts on  XYZ at a premium of two dollars and fifty cents  

you have promised the buyer he can buy XYZ for  one hundred and fifty four dollars at any time  

before the expiration date the stock could now  go in one of the three directions one XYZ goes  

up and the buyer wants to buy at one hundred and  fifty four dollars we'll make money by selling  

the stock since you bought at one hundred and  forty dollars to XYZ go sideways and the option  

expires worthless you keep the premium two dollars  and fifty cents multiplied by five hundred three  

XYZ goes down and the option expires worthless  you again keep the premium of $1,075 as your  

cash flow the stock is falling in value yet you  continue to sell options on your shares month  

after month the whole year and you have generated  a nice income the famous investor Warren Buffett  

has used the same method for years to generate  additional income on his holding company he sells  

a lot of put options which means he is making a  promise to buy a stock at a certain price before  

expiration let's pretend that Warren Buffett  wants to increase his holdings in coca-cola  

KO the stock is trading at $39 per share Buffett  conducts a fundamental analysis and decides he is  

willing to buy at $35 he sells five million put  auctions with a $35 strike price for a premium  

of five dollars and fifty cents that would be  an income of 7.5 million dollars if Coke shares  

fall below $35 the option buyer would then sell  their shares to Buffett and he would buy at the  

price he wanted anyway if the price of coke climbs  instead Buffett would still be happy to collect  

the premium 7.5 million the same will be true if  the stock holds steady at $39 educated investors  

position themselves in such a way that they can be  happy regardless of what direction the market goes  

pillar for risk management basic risk management  is the fourth final and most important of the four  

pillars for any type of investor keeping a tight  leash on risk is perhaps the most important skill  

you can have when investing you're dealing with  all types of risk systemic non-systemic purchase  

risk interest rate risk political legislative  risk and etc as an individual you certainly  

cannot control these factors but you can control  your exposure to risk implementing massive intense  

unbreakable rules here is your risk management  toolbox solid fundamental and technical analysis  

skills proper risk reward ratios by setting a  target you can calculate the reward you are aiming  

for and decide how much risk you are prepared to  take to get the reward stop-loss orders and exits  

your exit order will be triggered if the trade  turns against you limiting your loss protective  

put and call options insure against loss just as  you insure your house against fire non correlating  

assets if one of your trades tanked all the others  won't necessarily tank with it position sizing  

what percentage of your counter you're prepared  to risk in a single trade now that you have  

become familiar with the four pillars of investing  your next steps will be to review your lifestyle  

goals your money goals and your education goals  develop the habit of doing fundamental analysis  

practice paper trading in a virtual accounting  begin building your investment team never stop  

learning as a final thought let us offer you a  vital truth there are no true money problems only  

education deficits the lack of money is always  secondary it's never the primary problem if you  

enjoyed this video you're assured like another  one of our summaries on a rich debt advisor book  

tax-free wealth thank you for watching please  check out our channel for more videos like this  

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