This is the archive index of Frequently Asked Questions. You can scroll through this archive or to quickly find something you can also use the search feature below. You can also ask questions through this form.
Where Do I Live
I get asked this often. I live in Canada, 2 hours outside Toronto, Ontario.
How Long Have I Been Investing
I started investing in 1972 using a broker. The brokerage lost a lot of my capital in the 1974 stock market crash. They explained to me that “no-one” was making any money and taking huge losses. That’s when I decided to take what was left of my capital and learn how to grow it and protect it. I learned quickly that options strategies could do just that by providing growth, profits, income and protection. I had a mentor who worked with me for several years. He advised me to buy stocks near the bottom of the 1974 market crash and recovered all my losses and compounded my capital quickly. He had been doing over the counter options for many years prior to my meeting him. He introduced me to the concepts of Put Selling and the value of covered calls as well as credit spreads. From there over the years I have developed the strategies that I use today and many of which are on my website.
Options Are “Risky”
Investment dealers, financial planners and brokers often tell clients options are risky. In return, ask them if they have their license to trade in options as a dealer. You may be surprised to find that they do not. You may also be surprised to find that they have never traded in options and have not real understanding of them. Why then should you consider their advice? This is like someone telling you that driving is dangerous but they themselves do not have a driver’s license and have never driven a car.
It is actually stocks that have the most risk, not options. It is options that when applied, work to reduce the risk of stock ownership. Options when used correctly work to bring in income for an investor, protect the capital being used from plunges, and can provide a steady stream of profits which is done properly, can be consistent month after month. If you review the various stock portfolios I have listed you can see the returns from my trades. You begin to see that using options is perhaps the best tool available when investing.
Options strategies can be simple or as complex as you want. It is not options that are risky but investors who fail to understand the option strategy they decide to implement. Investors need to become educated about the strategy itself and how to profit and protect positions with such strategies. Without the proper knowledge or understanding of the option strategy being used, investors will continue to experience losses and warn other investors that “options are risky”.
Aren’t You Breaking Investment Rules By Having More Capital In One Trade Than In Others
The concept of having your capital equally spread among stocks, sectors or ETFs, is I believe wrong. Instead I follow a focused investment approach which is obvious looking at my trades. This is the same advice from Warren Buffet, Peter Lynch and William O’Neil to mention just a few. When I invest I am not just buying or selling a stock, I am buying and selling a business. I believe the best way to invest is to focus my portfolio on those stocks that I think will provide the best returns for the trade or strategy I am currently employing. Spreading your capital evenly among a variety of stocks, sectors, ETFs, countries, commodities or other assets works well for financial planners, brokers and banks who follow a template style of “one size fits all” approach to investing. This is why their returns are never anywhere near mine. I study the companies I invest in and understand them and their potential for earnings and capital gains. Template driven investing believes that if the risk is spread out wider enough when one sector performs poorly another will perform well. In reality this means mediocre returns at best and earning less than 12% a year cannot compound my capital fast enough. Template driven investing serves brokers, financial planners and banks well since they are more focused on getting new clients than maximizing returns of existing clients. I have never seen a template driven system ever give 12% plus returns every year including corrections and bear markets. This is why they like to list their returns over 5 and 10 year periods. That helps to even out losses. My investing looks at annual returns only. I don’t care what returns have been made over a 5 or 10 year period through a template system because I may have started investing at the wrong time and sold at the wrong time so my returns may be a lot poorer than even their 5 and 10 year reported returns.
What Charting Software Do I Use
I use the charting software from my Brokers. As I am in Canada I use TD Waterhouse Active Trader Plus platform, Questrade has a great platform called IQ Suite and I use Interactive Brokers. You may want to read the article below on BEST CHARTING SOFTWARE to learn more.
I get asked this a lot. The best charting software may be from your own discount brokers!
Dollar cost averaging fails to provide anything more than mediocre returns at best. The belief that dollar cost averaging reduces risk of capital loss does not work as a Vanguard study found. It is important to understand that dollar cost averaging suits investment dealers and financial planners well. They do not have to recommend ETFs, stocks, bonds or other asset classes for the best times to buy and sell. In fact they have very little homework to do at all but instead can simply spend most time looking for new investors rather than maximizing the returns available for their existing investors. Dollar cost averaging is a poor choice for investors but works well for investment dealers. Here are two articles worth reading: Dollar Cost Averaging Failure Confirmed by Vanguard; Dispel The 9 Myths of Investing.
Many investors believe ETFs are safer than stocks and can provide superior returns. ETFs are as risky as stocks and not a “safe” vehicle. This article on dispelling the 9 myths of investing looks at ETFs in Myth #5. The article if for members only. Select this link to read why ETFs are not safer than stocks for investors.
I get asked this all the time. Here is my answer on how to find the best discount broker in both Canada and the United States.
I get asked all the time why I would risk my capital for small gains. For example here a reader asked: “I don’t understand the money amounts. When you talk about buying a put for .48 cents (for example), surely there is more money involved. Can you point me in the right direction?”
This reader wondered about the bond portion of my overall portfolio and how I handle bond investing as well as any bond strategies.
I get asked this question often so here is a direct link to the Ultimate Oscillator settings I use for spotting oversold and overbought extremes in stocks.
I get asked a lot about paper trading. I use paper trading all the time and have for over 35 years. This is a three part series I wrote on paper trading. I hope it helps.
This question is often asked because investors want to know what the survival rate is like for options in bear markets. It is very high but it takes time for markets to recover. Here are the bear markets I have survived through.
Disclaimer: There are risks involved in all investment strategies and investors can and do lose capital. Trade at your own risk. Please read the full disclaimer.