Generate Huge Returns From The US Stock Market

 

 

 

 

 

 

 

 

 

 

 

Today I like to share with you my interview with The Standard Hong Kong. In the article , I discussed about my 2  favorite long term trading styles. It’s pretty hands-off as I only trade twice a year 🙂

In this golden age of investment, money continues to be the main driver for most matters. Although investment opportunities abound everywhere, the US remains a land of confidence, embedded with immense prospects.

In the 19th century, the American Dream stood for promised prosperity and success through hope, effort and aspiration. Today, the Wall Street in New York represents the identical dream, though on another level. The US market has been, and will continue to be, an incredible source of wealth generation. When it comes to investment choices, there is no shortage of investment vehicles in the current US stock market.

For investors who are interested in the US stock market with a longer-term perspective, Mirriam MacWilliams, chief options trainer of Wealth Mentors, shares her insights on generating enormous returns from the US stock market.

Long-term trading plan

Diversification is one of the golden rules of investing. Mirriam agrees: “It is generally best to stay away from a few specific stocks since an investor will be better protected by investing in a basket of stocks. A very good example is the collapse of Lehman Brothers. Investing in ETF’s is safer and many pay handsome dividends.”

For longer term investing, Mirriam likes ETF’s such as the DIA (following the Dow 30 stocks), SPY (following the S&P 500 stocks) or IWM (following the Russell 2000).

The best time to begin investing in the US stock market is, historically, the last two days of October. To elucidate, she offers two styles of longer-term investing:

Plan A Investing: Trading twice a year to earn handsome returns

“Make a lump sum investment in the markets,” Mirriam suggested. “Take advantage of being in the market only when the seasonality of the markets dictates that we stay and looking to exit when it dictates we exit. The markets have a seasonal tendency of going somewhat flat and/or being the most volatile during the summer months, from June to October specifically.”

The investment guru advises taking a lump sum of investment capital and purchasing a bullish ETF that pays a handsome dividend such as SPY, during the last two days of October. Then exit that position by the first week of May of the following year. Do not re-enter until the last two days of October again. In other words, hold it for a few key months.

Some figures will facilitate better understanding. “If you were to take US$10,000 investment capital and compound the returns for 23 years, that capital would now be in the hundreds of thousands of dollars. And this is with just taking action twice a year!”

Plan B Investing: Making incremental investments

An alternative is to make incremental investments in the markets. Invest every three months, doing this just four times and holding onto that investment of capital. The target will be a doubling of the capital. Riding out highs and lows would not be a problem since this strategy captures dividends along the way.

Exit at the right time to preserve accumulated wealth

Timing exit holds another key strategy in investment. With the right timing, investors will not end up losing what that they have patiently accumulated. According to Mirriam, the inverted yield curve, where long-term interest rates have lower yields than short-term interest rates, is a good exit indicator.

“An inverted yield curve means that investors have so little confidence in the economy that they prefer 10-year treasury bonds at a lower yield to 1-year treasury bonds at a higher yield. Historically, such curves have preceded many of the US recessions. Consider the years 2000-2001 and 2007-2008 and you will get a clear picture. The inverted yield curve is now often seen as an accurate forecast of the turning point of a business cycle.”

Trading options to generate enormous returns with small capital

Recession does not necessarily imply idle investment activities. Keen investors generate wealth in the US stock market even in times of financial slump. To Mirriam, trading options at the bottom point of a business cycle is a smart choice.

“Leveraging your capital by purchasing options, you generate incredible returns even as the market is dropping in price,” Mirriam revealed. “Trading options gives us the ability to control a large number of shares with a small capital. There are no margin requirements. And a small movement on the SPY will generate a magnified movement on the option. You can also trade options over a few months, a few weeks or a few days.”

“I know some people think trading options is risky, but this is probably the same for any other financial instruments. Get yourself educated and once you know how to trade options to your advantage, you can generate 20% to 100% returns with just a small amount of money. The key to successful options trading is a consistent trading plan with sound money management to control your risks. This is how I turned US$10k to US$2 million in just two years using options!”

I coach this trading method in greater details in my training course. If you are interested to know more about coaching, you can check out our free introductory seminars.