Book Summary Preview : Making 36%

The Big Idea

A lot of people who invest in the stock market often fail to make big returns on their investment while others seem to hit the jackpot. “Making 36%” by Dr. Terry F. Allen offers a clear strategy that is designed to make at least 36% profit, in good years and bad.

The book shows you how to manage your options to achieve maximum gains in a flat or a fluctuating market. Each step is revealed so that you can follow it yourself or get a broker to do it for you.

I. Flat Markets Ahead

Most of the experts predict flat markets in the coming years, which means market returns will continue to decline, stay the same, or just be minimally higher than they are now. This also means it will be difficult to make money in the stock market in the next few years.

So where do you put your money?

II. Don’t Buy Individual Stocks

Individual stock prices can fall any time due to a number of reasons – the company fails to meet quarterly earnings, gets hit by a lawsuit, is accused of corporate shenanigans like cooking the books, or because the market as a whole goes down.

On the other hand, if you own a broad-based Exchange-Traded Fund (ETF) like the S&P 500 SPDRS or the Russell 2000, you only have to worry about a general market decline.

Owning an individual stock is almost as bad as buying a full-load mutual fund; you might get lucky and make some money, but most of the time you can’t beat the market averages.

III. Never Buy a Mutual Fund

Don’t put your money into an investment that has a 75% chance of losing. Over the past 50 years, mutual funds have lost 180 basis points – compounded annually – compared to the S&P 500. The average mutual fund investor gets a return that is significantly below the return of the average mutual fund. 

Even if you purchased on the highest-ranking mutual funds, you would find that in the following year, over 50% of those funds would underperform the S&P 500.

Instead of mutual funds, invest in index funds. A $10,000 investment in 1982 in an index fund matching the S&P 500 grew to $109,000 by the end of 2002, while an identical investment in the average managed stock fund would have grown to $63,000. 

IV. Ignore the Analysts

Most analysts rank companies as “strong buy,” “buy,” or “hold” (which is a euphemism for “sell”).

If 20 out of 22 analysts rate XYZ a “buy” or a “strong buy,” that is probably an excellent reason to sell the stock. This is because most of the analysts’ clients have already bought the stock. At the same time, after a stock is recommended as a strong buy, the odds are any change in their assessment will be on the downside. And downgrades kill a stock.

V. Winning the Loser’s Game

When you buy a stock, it is usually because you just read an article or two about a company, or received a tip from a friend or broker. When a professional buys a stock, it is usually after extraordinary research. So they have better odds of being right about the market.

This means every time you make a trade in the market, the chances are about nine out of ten that the other side of the transaction is taken by one of these smart professionals who has all the resources you lack. So if you are buying, they are selling. If you are selling, they are buying.

The 36% stock options strategy helps you win the loser’s game in the stock market.

VI. Options Are Less Risky Than Stock

Most people believe that options players are extreme risk takers. After all, they purchase an asset with a very short life, and hope it skyrockets in value. Option buyers might make 500% or more if they buy the right option, just as they would do if they picked the winning horse at the track.

But, the stock doesn’t go the way you guessed, you lose your entire investment. Even if the stock stays flat, most option buyers still lose most or all of their money. Also, most people think an option is a declining asset. It depreciates faster than a new car. It becomes worthless in a matter of months.

 

Want to read the rest of this summary? click here >>