Welcome to Part 4 of this multi-part series of blogs where I will teach you a better way to invest in the stock market: Your Mind-Set.
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Read Part 3
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In Part 3, we revealed to you the smarter stock market investment strategy that has been used successfully by banks and financial institutions for over 40 years. Knowing how is one thing. A lot of people have ideas for making money. The ones who actually get rich from it are the ones that successfully convert those ideas into action.
Having the right frame of mind is the other key part of the ingredient for you to successfully invest in the share market the smart way. That is why I am going to use Part 4 to help you gain a winning mentality that will open a path to success and financial freedom for you.
It’s a bit longer than usual but it is worth it to invest a bit of your time to reprogram your mind for success.
It’s All In Your Mind-Set
You cannot expect victory and plan for defeat.
It really is all in your mind-set. If you believe the ‘autistic economics’ we are pedalled through the mainstream media and various institutions of allegedly higher learning, the way to make money on the stock market is to buy and sell stocks, options, securities, futures and so on. Sure, but where does it say you have to sell at a loss just because the stock price is lower than it was when you bought it?
When you purchase an investment property and you find within the year that property to be worth less, do you sell it? No you don’t. You are still earning income off that property irrespective of its current value, whether higher or lower.
Unless you buy the first stock you see or you fall into the clutches of an unscrupulous broker who advises you to buy what he makes the most commission from, you should be able to buy stock with the right education and a set of tools to pick the right stock that will hang around and enjoy growth, year on year. Modest growth certainly, but steady, year on year growth or, at worst, no fall in value not soon offset by a return to par. I will tell you which stocks fit these criteria and how to choose them. You become educated, then you don’t need to rely on others.
It is not rocket science but it does take a little education in what to look for in a good stock to buy and hold. Buy. And hold. Not buy and sell, not day trade the penny dreadfuls or spend your life online watching the markets and getting ulcers and high blood pressure thinking you’re making money from forex or even bitcoin. None of that.
Select good stock, buy it for whatever the price is at the time you want in to enter the market, then hold it and leverage it through covered calls to make steady, reliable income each and every month. Take a look at the chart and see how the stock market has climbed steadily over the past 100 or so years. Sure there have been some drops and even plummets, but overall the direction of change has always been upwards. I would be so bold as to say it always will be, overall, upwards. That is the nature of the market, the economy, the world and human nature.
Graph: Dow Jones 1988 – 2021
I can remember when I was a kid and a can of soft drink was fifty cents. You could buy it by the carton in the supermarket for half that per can. The retail price charged in the milk bars took into account the refrigeration and the fact the shop was selling cans one by one. They needed a mark-up to provide them with a profit. If you didn’t want to pay the retail price you could buy it for half at the supermarket, but you had to buy two dozen cans at a time to enjoy the cheaper, ‘wholesale’ price. So instead of paying fifty cents for one can, you were paying $6 for 24. A huge saving provided you had the six bucks, needed the extra cans of drink and had the means to store and cool them. If you were out and about and just wanted a drink to go with your sandwich or pie for lunch, buying an entire carton of warm soft drink was not a good solution.
The same can be said for waiting until the stock you want to buy has dropped to some, for whatever reason, acceptable price to you. You could be waiting a long time, even forever. If it doesn’t fall but keeps going up then you will kick yourself for not having bought in way back when. Not only that, all the time you sit and watch and wait and hope the price will drop, the stock is not out there as a covered call making you money.
Learn the Stock Market Investing Mind-Set by attending the “60 Minute Investor” Online Masterclass for Free!
Think Now, Not When
Think ‘now’, not ‘when’. Just as those cans of soft drink are now retailing at $2.50, I can still buy a carton of warm ones for a lot less per can but they still need refrigerating and carrying home and all the rest. If I had bought 1,000 shares in Apple way back when, if I had bought gold when it rocketed to US$900 an ounce, if I had… “If” has no place in sensible investing. “If” is a gambler’s word, a speculator’s word.
Choose your stocks now and buy them now. Get them out there and making money for you from now. Not from next month or when the price falls to whatever, or if this happens or that occurs. Now!. The reality is the stock will eventually go up and cost more to buy then than it does now, so why wait? If you pick a stock and wait and it does go down, what does that say about your choice of stock?
Either it is a temporary drop and will soon recover, or it is on its way out and you shouldn’t have bought the stock in the first place. This usually occurs when investors get too clever and try to discover, single-handedly, the next ‘sure thing’. Far better to jump on the same wagon everyone else is riding and have been for decades, where there is a good history of solid performance. What they call ‘blue-chip’ stocks and make sure you do your own due diligence with a Proven system that has a track record of results and income generation like Fokas Beyond.
So read on and learn about why I chose to obtain the education I am about to share with you. I will tell you precisely why I do what I do and why I do it this way, and you will understand the rational behind my method. I am sure once you learn a little more about me and what has driven me to get to where I am today you will feel more confident in reading on and learning my method. Hopefully by the end of this series of blogs you will be confident enough to actually apply the lessons taught.
New Jobs, New Challenges
There are jobs advertised today that didn’t exist ten, or even five years ago. Computerisation and the Internet have made sweeping changes to the workplace and the way we work. Artificial Intelligence (AI) is also changing the way we work in the future and in the next 10 to 20 years, we will lose a lot more jobs to AI. Many of us don’t really need to commute into a place of work, but could be just as effective telecommuting and working from home, online. At least, up to a point. Studies show many telecommuters soon resent the lack of interaction with colleagues on a face to face basis. While it is more time and cost-effective to work from home, not having the chance to swap gossip over coffee or meet at the water cooler means more to some than others. Some people simply can’t handle telecommuting. We humans are, after all, a herding animal in the main.
Australians and Americans do work hard and surveys in recent years put that commitment at around 60 hours a week, even though most of us are paid for 40 or less, 38 hours, 37.5, some just 35 hours, and that is considered full-time employment. Few would actually do just the mandatory minimum, even those in waged positions, paid by the hour in retail and hospitality, often find themselves doing unpaid overtime, if only out of fear of losing their job to someone willing to work for free, which is what unpaid hours are. Too many of us are in situations where, if we lose our job, we are one payday away from financial collapse and ruin. It is even worse for many couples, mortgaged way over their heads and both praying they hold onto their jobs so as to maintain funding the consumer lifestyle so many today unwittingly support.
My dad was fortunate, in some ways, that he lived and worked (hard) in an era where there still was some semblance of job security. He only knew one way to make a living, and that was to go to work for someone else and to work as hard and as long as you could. While this is honest and ethical and to be respected (and I do), it is not necessarily the smartest or the most effective way to make a living, and it never has been. The problem for all those men and women like my parents is that nobody ever told them it could be any different. Nobody ever told them how to make a living working smarter, not harder.
One Hundred and Sixty Eight
What if I could make money without swapping chunks of time? Basically that is what most of us do. We develop skills that we exchange for money, usually based on a dollar per hour rate. I know if I work 40 hours a week at $25 per hour I can make $1,000 per week, every week that I work.
| Activity | Hours x Days | Hours |
| Working | 8 hr x 5 days | 40 |
| Commuting | 1 hr each way x 5 days | 10 |
| Sleeping | 8 hr x 7 days | 56 |
| Eating | 2.5 hr x 7 days | 17.5 |
| Personal Hygiene | 2 hr x 7 days | 14 |
| Total | 137.5 |
Then they take out income tax and of course it costs me money to get to and from work and I have my living expenses to cover, so there may not be a lot left over to save or invest. If I was paid $50 per hour and made $2,000 a week, that doesn’t mean I will have an extra $1,000 now. It just means my lifestyle adjusts accordingly. Be honest; most of us have taken that pay raise and spent it. If not right away, over time our expenses have always crept up to match, and too often exceed, our income.
In any one week there are only 168 hours, no more, no less. We all get the same ration, so it really is what we choose to do with them that makes the difference. Won’t bore you with all that motivational self-help stuff you can read in countless books; it is all true and everything but this isn’t the place to rehash what most of you no doubt are already aware of. So let’s get back to our 168 hours.
This leaves just 30.5 hours per week, plenty of time for a second job, right? I know, I didn’t put in any allowance for watching television, talking to your spouse, playing with your kids or anything like that. If I had added just 90 minutes per day for those activities you would now have 20 hours left for that second job that is going to make all the difference and elevate you into the world of wealth and success!
If you make $25 an hour at your main job, how much do you think you can squeeze out of this second job? Even if we make this second job pay as much as our first one, we can only make a maximum of $500. $25 an hour multiplied by 20 hours is $500. I realise $25/hour works out around $52,000 per annum, which is a salary in the low to medium income bracket these days, but let’s use this amount because there are many people making that, and less, who can and do invest in covered calls and are making a respectable second income doing so. Let us ignore for now the reality that anyone on 52K is really not going to be considered by a lending institution for a first mortgage of any size, let alone a second one for an investment property, but bear with me.
The Second Job Myth Explored
Without the second job, our $1,000 a week nets us somewhere between $700 and $800. On an income of 60 hours x $25/hour, we gross $1,500 a week, which attracts a tax deduction of $348-$482, depending on how we go with our tax-free threshold. Actually, we could claim the tax-free threshold on the main job and pay just $178 in tax, then pay the no tax-free threshold rate on the second job’s $500, which is $126. So assuming we were living off the first job to begin with, that leaves us $374 extra per week to service the mortgage with. Out of that, we need to get to and from this second job, and there will be other claims on the extra money so I have allowed a little over half the gross income from the additional 20 hours of hard graft to be available for investing in a property.
We now have an extra, say, $260 a week; the bank is going to love us, throw money at us, beg us to take out loans with them, right? Maybe. Maybe not. Presuming you had the deposit, stamp duty and other upfront expenses under control, at 5.88% interest over 25 years, repayments of $260 a week are usually made on a loan of $177,000. This doesn’t mean the bank will actually lend that to you, remember my dilemma and I already owned five properties! A loan of $177,000, factoring in the 5%-10% deposit in cash, puts the property into the $185,000 to $195,000 bracket. There is not a lot of property bringing in rental returns of $260 per week (neutral gearing) at that price. There is no way you could positively gear the property in the Australian rental market and more than likely you would be relying on a negative gearing strategy to offset some of that 48% second job tax rate.
For those not familiar with the terms negative, neutral and positive gearing, they refer to the return on investment. If you are negatively geared then it costs you more than it brings in. If it is positively geared then you make money on your investment and neutral gearing means you break even. If you have a rental property bringing in $300 a week in rent, but the mortgage and property management, rates and so on cost you $310, you are negatively geared. If you are doing it right you should be able to offset that $10 loss against the income tax you pay. If the property brings in $310 you are neutrally geared, and $320 means you have to declare that extra $10 a week as income to the ATO/IRS (taxman) and are positively geared. Ok? Let’s continue.
A Lot Of Effort For…
For that investment property you are working 60 hours a week, plus commuting time. You have so few hours for yourself let alone anyone else. Even if you are single and have dedicated the next however many years of your life to this plan… how long do you honestly think you can keep it up? If that second job was what was keeping you and your family alive, then no doubt you would hack it as long as it had to be hacked. So many breadwinners in the USA are working two, even three jobs, getting paid anything from $2.25 an hour plus tips for some hospitality industry staff, to just $7.25 an hour, minimum wage, for adults with families. Many have only 30 hours a week full-time employment and rely on food stamps, ironically often spent at the same stores that employ them on such low wages. They work the other jobs just to make ends meet and have no concept of ever breaking this poverty cycle. And this is the world’s wealthiest nation, remember.
My recent trip to Greece with my family for 2 months opened my eyes to the current crisis they face. I saw how average people are struggling to make ends meet. University students were earning 1 Euro an hour in jobs working 8 hours a day for 8 Euro. When you take out rent, food, education, what is left?
In Australia we have it a lot better. Our minimum wage for an adult full-time employee is currently around $16 an hour, but anyone making that at a job, putting in 40 hours a week, is grossing just $640 a week. If they got a second job for the 20 hours we have decided are available to our hypothetical example, they might gross another $320 before tax. Tax on the first job works out at $55 and about the same on the second job. Let’s say you take home $800 for 60 hours of work, plus however long it takes you to travel between them and your home. If you are the only breadwinner you are going to be dependent upon Family Tax Benefit A and B and any Child Care Benefit. This doesn’t mean it can’t be done, the owning an investment property dream… It just means you would have had to buy a place twenty or more years ago before the real estate values in this country went into silly numbers. Or you are looking at a little cottage in the wilds of Tasmania where there is no employment for miles around to provide a first job at minimum wage, let alone a second one. Sixty hours a week is an awful lot of effort for not a lot of return when you take into account factors such as quality of life, work/life balance, seeing your kids, that kind of thing. That isn’t living, people.
“If money is not that important to you, that is why it is absent in your life.”
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OK, I admit, that was quite long! But I hope that you are beginning to see my point. I am trying to get you to think about wealth generation in a different way – the way successful and wealthy people do.
In Part 5, we are going to conclude this point and show you the power of being able to earn money without having to invest all of your time like most people do.
Are you ready? Click here to read Part 5.
Learn the Stock Market Investing Mind-Set by attending the “60 Minute Investor” Online Masterclass for Free!