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How to Get Rich Quick in 2019 [3 Short-term Investments] - YouTube
Channel: Let's Talk Money! with Joseph Hogue, CFA
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I’ve got three investments that will make
you rich this year.
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In fact, I made a 4,000% return on one just
two years ago and use the other two regularly
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to double my money.
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We’re talking how to get rich in 2019 today
on Let’s Talk Money.
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Beat debt.
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Make Money.
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Make your money work for you.
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Creating the financial future you deserve.
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Let's talk money.
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Joseph Hogue with the Let’s Talk Money channel
here on YouTube.
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I want to send a special shout out to everyone
in the community, thank you for taking a little
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of your time to be here today.
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If you’re not part of the community yet,
just click that little red subscribe button.
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It’s free and you’ll never miss an episode.
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This is going to be a fun video.
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We talk a lot about investing and building
wealth here on the channel but it’s all
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that slow-and-steady approach.
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Even the ‘How to Become a Millionaire’
video last week was about building a business
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over time and the habits you need to develop
to be successful.
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This week is going to be different.
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In this video, I’m going to reveal 3 investments
you can make that could potentially make you
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rich in 2019.
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Jackpot investments that, if they pay off,
will make you rich in less than a year.
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What we aren’t going to talk about are traditional
investments like stocks.
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Like I said, those will make you wealthy but
it’s not going to happen overnight.
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At even a solid 10% annual return on $500
a month invested, it will take 31 years to
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reach one million dollars.
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I’m going to take what I learned working
for venture capital firms and as a private
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wealth manager to show you the ways to get
rich fast.
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Then I’ll reveal three secrets that will
help you get there no matter which strategy
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you choose so make sure you stick around to
the end of the video for those three tips.
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We’re going to get started on these three
jackpot investments to make you rich but I’d
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love to hear your ideas.
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What’s your best get rich investment idea
and how does it work?
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So scroll down and tell us in the comments
below the video.
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Our first few ways to get rich are going to
be in leveraged investments.
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This means investing in something that takes
your money farther than just what you put
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in.
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Some of these investments will pay 50-to-one
on your money and pay off within a month or
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two.
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That means you can potentially start with
$1,000 dollars, roll it over a few times and
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be easily into six figures by the end of the
year.
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The first one here probably has the most potential
and that’s trading futures contracts.
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Futures are financial contracts to buy or
sell something at a set date and price, usually
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in the next month or few months.
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Most futures contracts are bought or sold
as a way to reduce risk.
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For example, a farmer might sell October contracts
for wheat.
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The contract sets a price they’ll get months
in advance so they don’t have to worry about
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prices in the meantime . On the other side
of that, a food processor like General Mills
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might buy those contracts so it locks in its
price for that corn it needs to make your
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breakfast of champions.
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Futures can also be used for investment.
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You can buy those contracts for wheat if you
expect the price to go up then sell them before
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the delivery date . But here’s the beauty
of futures contracts, you can buy contracts
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worth hundreds of thousands of dollars for
just a few grand.
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For example, each single contract for West
Texas Intermediate or U.S. crude oil, is for
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one thousand barrels.
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Now at the current price around $70 a barrel,
that would mean seventy grand per contract
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to buy or sell depending on what the futures
price was.
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But you’re only required to deposit about
$3,500 for each contract.
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So you can bet on the price of 3,000 barrels
of oil for about ten thousand dollars.
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That’s about 20-to-1 times your money.
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So let’s do the math here and this is an
actual trade I made in 2016 after the price
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of crude had bottomed in February at around
$26 a barrel.
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By March it was clear that prices had gone
too far and were on the rebound so I bought
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two contracts for $38 a barrel for May delivery.
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The current or spot price at this point was
just under $36 so the market was expecting
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price to go a little higher but not much.
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I put down $7,000 for the three contracts
worth $114,000 but this was actually more
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than I needed to deposit.
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I could have put down as little as $5,700
for the investment.
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Crude prices kept climbing and by May had
reached $45 a barrel when I sold my contracts.
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Remember that each contract is worth 1,000
barrels so the three contracts were now worth
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$135,000 or a gain of $21,000 from the original
price and I had made three-times my investment
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in two months.
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That’s potentially a 4,000% annualized return
or 40-times your money but like all the jackpot
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investments we’ll talk about there’s a
huge risk here.
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If the price had gone the other way, I could
have lost my entire investment in a heartbeat.
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In fact, I remember one trade in 2012.
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I was trading gasoline futures and there was
an explosion at a Canadian refinery overnight
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. The price of gasoline spiked like four percent
overnight.
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Since I had shorted the contract, betting
the price would go down, then I lost over
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ten grand on the investment.
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There are five types of assets that trade
with futures contracts.
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You can buy or sell energies like oil, gasoline,
heating oil, natural gas and ethanol.
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There are contracts for currencies with the
dollar, euro, British pound, Yen and Mexican
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peso all heavily traded.
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You can buy or sell contracts on the direction
of the stock market.
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There are contracts on the metals including
gold, silver, aluminum and copper.
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And finally almost any agriculture commodity
will have a contract so corn, wheat, soybeans,
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rice, coffee, cattle, hogs, you name it .
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Most online investing platforms will allow
you to open a futures account with a broker.
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There is a lot more than goes into futures
trading, determining where you think the price
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will go and setting up your investments.
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I’ll do a video exclusively on futures because
it can be a really amazing investment.
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A few tips here though.
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First, always understand the downside and
catalysts for the trade to go the wrong way.
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You also need to set stop orders so if the
price goes against you, you don’t lose too
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much money.
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It’s also a good idea to trade in a few
different types of assets so that if one trade
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is losing money then maybe the others will
support your profits.
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Our next jackpot investment to get rich is
through options trading.
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Options are contracts to buy or sell stocks
but with a very important difference from
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Futures.
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Buying an option gives you the right to buy
or sell a stock but not the obligation.
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So there are two types of options.
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A call option gives you the right to buy shares
while a put option gives you the right to
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sell shares.
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When you buy or sell an option, you’ll see
an expiration date which will always be the
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third Friday of the month, you’ll see a
strike price which is the price of the shares
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for that option and you’ll see the price
of the option.
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Let’s look at an example to make it easier.
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We see here that shares of Apple are currently
trading just under $204 per share, this is
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mid-November.
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Now I’m looking at the January 2019 options
so this investment will expire on January
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18th in a couple of months.
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I can buy call options at $200 per share which
means I can get the right to buy Apple for
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$200 a share in January, that’s the strike
price.
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Now for the right to do this, I have to pay
about $12 a share, that’s called the premium
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for the option.
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So if I pay $12 for the right to buy Apple
at $200 in January and the price of the shares
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goes to $240 by that time what does that mean
for me?
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That option would now worth at least $40 right,
because if it was less than $40 someone could
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just buy the option and then sell the shares
immediately for a riskless profit.
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So instead of buying the shares, I could just
sell the call option for $40 and a return
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of 233% on my money.
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Each option contract is for 100 shares so
one contract would have cost me $1,200 and
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I could sell it for $4,000 or a profit of
$2,800 for each contract that I bought.
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Remember, options come in two types, call
and put.
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So if I thought Apple shares might fall then
I could buy a put option which would give
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me the right to sell shares at a certain price.
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Going back to the example, I could get the
right to sell shares at $200 for $7.59 per
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share.
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If the price goes down to under $192.41 by
January, that’s $200 minus that price I
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paid for the right to sell the shares, then
I’ll make money.
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Options can also be used for protection and
this is primarily how I use them.
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So if I own shares of a company and I’m
worried about the price going down over the
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next few months, I can buy a put option for
the right to sell my shares at a certain price.
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I’ve effectively locked in that price as
the lowest I’ll get on the stock even if
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the market price falls further.
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The important thing to remember here is that
buying an option gives you the right but not
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the obligation to buy or sell a stock.
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So if I buy those call options on Apple and
the share price isn’t above $200 in January,
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I sure as hell am not going to buy them for
$200 each.
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I would just let that option contract expire
but I would lose the $12 per share I invested.
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Similarly, if I bought put options against
a stock I own and the price of the shares
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didn’t fall then I’d just hold on to the
stock.
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The price I paid for the put options would
be gone but they did their job, protecting
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me from any short-term weakness.
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Now the payoff for the Apple options wasn’t
huge because that strike price was very close
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to the actual price, so we weren’t betting
on a big move in the shares.
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Let’s look at another example to see how
options can make you rich.
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Here we have January options for shares of
McDonald’s.
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I’ve picked McDonald’s because it’s
a stock that doesn’t normally see big changes
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in the share price.
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That’s important for options trading because
it will be built into the price you pay for
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each contract.
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If the shares jump around a lot, it will cost
more for the right to buy or sell the shares
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because there’s a higher chance the shares
will be much higher or lower by expiration.
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Say we’re expecting shares of McDonald’s
to absolutely tank by January from trading
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at about $182 per share right now.
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Maybe we have a lawyer connection that says
Ronald McDonald is being sued for alimony
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or John Amos has just opened up a McDowell’s
down the street from every restaurant.
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Either way, the happy meal ain’t so happy.
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So we can buy a put option to sell the shares
for $145 each and pay just $0.36 or $36 for
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each contract since an option contract is
for 100 shares.
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Now if shares of McDonald’s plunge 35% by
January to $118 then our put option is worth
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at least $27 each because we have the right
to sell shares for $145.
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That $36 we put down for each option contract
is now worth $2,700 or a 7,400% return.
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To trade options, you only have to be approved
on your online investing account.
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That usually requires a minimum of a few thousand
in the account but that’s about it.
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Like I said, I generally just use options
to protect my investments or to make a little
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more money from them but you can make a lot
of money very fast.
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There are some different options strategies
you can use but the idea is you need a strong
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reason to believe the price is going to rise
or fall quickly.
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You have millions of other investors looking
at each stock and all their expectations for
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the stock price are built into the options
prices so that average market expectation
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has to be wrong for some reason.
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Now in my example above, finding out from
your lawyer friend about Ronald’s legal
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troubles would be insider trading and you’d
go to jail but there are a lot of other ways
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to find why you think a stock should be much
higher or lower.
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Again, I would suggest having options bets
in several stocks to diversify your risks.
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Stop loss orders can also work here to limit
your losses and don’t feel like you have
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to make an option bet on every stock you think
should be higher or lower.
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Be selective where you place your money.
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Our next jackpot investment is the darling
of 2017 but hasn’t done much this year,
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Bitcoin.
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Now subscribers of the channel are going to
remember a video I did late last year warning
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investors about Bitcoin and suggesting bitcoin-related
stocks to pick instead.
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Those stocks are up over 20% since while the
price of the crypto-currency plunged more
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than 54% so it might surprise you that I’m
recommending it as a jackpot investment.
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There is no doubt that blockchain technology
and digital payments hold huge opportunity
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for the future.
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These two technologies will touch nearly every
sector of the economy and Bitcoin is by far
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the leader in crypto.
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So while I’m not one of the fans that thought
Bitcoin was the next best thing in 2017, it
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does have solid potential for future growth
and it will likely go much higher from the
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current price.
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Now one of my problems with Bitcoin and other
crypto currencies was the difficulty in finding
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some kind of a fair value.
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Because if you can’t find a reason to say
something is worth much more or less than
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the current price, how can you ever invest
in it?
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Bitcoin itself is just bytes of data.
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It’s not backed by any government so there’s
no intrinsic value and we’ve seen, it’s
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not a great store of value either.
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But there is actually one way to value Bitcoin.
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This comes from a mathematical theory called
Metcalfe’s Law and it’s been eerily good
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at finding a value for companies like Facebook
that have a network of users at the center
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of the business model.
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The idea is that a social network like Facebook
or say the network of Bitcoin users creates
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a value in that trading of information and
we see here that shares of Facebook have pretty
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closely followed the growth of its monthly
users.
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Now Metcalfe’s formula for this was the
number of users squared and we have estimates
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for the number of Bitcoin users that range
from six million to 13 million.
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So you would take the square root of each
of those estimates to build a lower and an
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upper band on the fair value.
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That means between $36 billion to $169 billion
market cap on Bitcoin.
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Now the current market cap with Bitcoin at
$6,500 is $113 million so we could already
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be around fair value now which is why the
price hasn’t fallen much further for most
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of the year.
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Of course the lowest estimate there would
still mean a price of around $2,000 for Bitcoin
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so there is the potential for some pain.
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I think you can buy some here even though
the average fair value is around $5,900 for
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Bitcoin.
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Buy more only if the price drops to $3,500
and hold it for an eventual jump higher.
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There will come a day when everyone has forgotten
how crappy Bitcoin was this year and they’ll
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start buying in again.
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Bitcoin has gone through four of these bubbles
so far and there will be another one someday.
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There’s one last point I want to make about
these three jackpot investments before we
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get to those three secrets to getting rich
on any strategy.
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I have each of these but none are more than
5% of my wealth.
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If the investment doesn’t pay off then it
doesn’t destroy my total wealth.
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Each has the potential for 10- or 20-times
your investment so even if one pays off then
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I’ve doubled my wealth.
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But that strategy isn’t going to make you
rich right.
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To get rich in 2019, you’re going to have
to put more of your wealth, maybe all of it
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on that lottery ticket.
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I’m not saying this is the smartest strategy.
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Personally, I’d rather stick with just doubling
my wealth but with limited downside than risk
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losing everything, but I’m not going to
judge what you want to do.
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That aside, I want to give you my three secrets
to getting rich on any strategy you choose.
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This includes the three we talked about or
any wealth building strategy and it doesn’t
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require a jackpot investment.
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In fact, these three secrets will help you
build real wealth, not just the get rich kind
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with the potential to bust you if your numbers
don’t come out.
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First is that you have to start with a mental
picture, a dream of what rich means to you.
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What do you want to do and what does your
life look like when you’re rich.
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This is important because if you don’t have
a definition of what being rich means, I guarantee
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you will never get there.
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We are hard-wired by evolution to always want
more, to not be happy with what we have so
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if you don’t sit down right now and define
that rich life, you’ll always be chasing
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it.
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This is actually a really interesting psychological
idea called adaptive hedonism and you see
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it in every part of our lives, right.
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You’re happy to get that job at first but
it isn’t long before you hate it or you’re
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the most blissful newlyweds but after a few
years, you’ve gotten used to each other
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and it seems like something has changed.
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Actually defining what it means to be rich
for you right now and building a mental image
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means when you get there you can actually
FEEL rich instead of still feeling like you
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want more.
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Our next secret to getting rich is going to
be to focus on passive income rather than
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those active income streams where you’re
always trading time for money.
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Don’t get me wrong, I love building my business
but there’s a limit to my time.
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If all I had was that one income stream, I
would always be limited to what I could make
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because I’ll always be limited by time.
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Create multiple streams of income, some that
take active work and others that can bring
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in passive income no matter how much time
you put in.
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Now we’ve got quite a few videos on the
channel on creating passive income so I’ll
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put a card up here to check those out.
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Finally is you need to spend your money on
assets rather than liabilities.
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This is the biggest difference you see between
rich people and those without a seven-figure
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portfolio.
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Assets are things that create wealth or the
price increases over time.
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So think things like stocks, real estate,
fine art, even a car if you’re using it
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to create wealth in a job.
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Liabilities are then going to be the things
you buy that destroy your wealth or that lose
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value.
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So that that gigantic 70-inch TV or all the
other things we buy and don’t really need
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or even the spending on things that last all
of an hour like eating out.
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There’s a fine line here too like you don’t
need a thirty thousand dollar car to get to
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work.
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Again, I wouldn’t suggest you put all your
money in these jackpot investments to get
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rich quick.
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I’d rather you put maybe 5% of your total
wealth in each along with a smart portfolio
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of stocks, bonds and real estate.
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Each of these lottery tickets can make you
wealthy but there’s a lot of risk involved
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as well.
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Learn how to play each of them before committing
too much money and start creating that financial
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future.
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We’re here Mondays and Wednesdays with the
best videos on beating debt, making more money
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and making your money work for you.
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If you’ve got a question about money, just
scroll down and ask it in the comments and
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we’ll answer it in a video.
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