An Income Investing Revolution
I was speaking with one of my clients who asked me a simple but critically important question: "What's the most powerful weapon to grow wealth in today's market?"
I told him that it was the power of cheap money for those that qualify. It's already true in the current real estate market. For those with sterling credit that can afford a 20% down payment, borrowing rates are in the insanely-low 2% range. We may never see rates this low again.
As I began to think about how exactly to profit from this situation, I hit upon a strategy that could provide 40% a year in annual income by turning low interest rates into a powerful wealth-building tool.
The key is allowing individual investors to act almost like hedge fund managers. I never thought that the individual investor would ever have the kind of access to the lending rates and commission structures that were once reserved for only the wealthiest of clients and private funds.
Back in the day, when the cost of running a 500-share trade of Coca Cola on a hand-written ticket would easily cost more than $100 to transact, we now see a plethora of online brokers vying for retail business by advertising transaction fees as low as $3.95 for up to 5,000 shares of stock bought or sold. This in itself is simply amazing and just shows how commoditized the industry has become—not to mention the fierce competitive landscape that has evolved, thanks to technological advances.
Cheap commissions represent the crumbling of one wall of efficient trading/investing, but there is another wall of obstruction for the retail investor to overcome. I'm speaking of margin rates, and how many firms have refused to give in on high lending rates for leverage at a time with the Fed Funds rate is near zero.
When I worked on Wall Street, I used to complain to upper management constantly about the double standard on lending rates for institutional accounts versus high-net-worth individuals. The high margin rates for individuals meant there was a powerful disincentive to use leverage in favorable trading strategies because of the cost to carry those strategies for any reasonable period of time.
Thankfully, this wall of exorbitant margin lending rates has also come down—along with pricey commission schedules—to a place where retail clients with a decent capital base to work with, say $200,000, can now manage their accounts the same way a $200 million hedge fund is able to. The business of leverage has charted a whole new and exciting course for accredited investors to operate on the same playing field as Warren Buffett, George Soros, Carl Icahn or T. Boone Pickens.
The newest two-pronged attack for taking on the markets involves using what is called 'portfolio margin.' Portfolio margin allows individual investors to leverage an account like a professional hedge fund while paying as little as 0.58% for borrowed funds on an annual basis. With rates this low—a hair away from zero!—it's an amazing time for high-yield investors in this window of opportunity that I believe will close within the next two to three years.
You see, traditional margin accounts only allow for two times leverage, while charging insultingly high rates. Fortunately, there are cutting-edge firms that have addressed the need for a platform that offers portfolio margin at rock-bottom lending rates.
|Deposit Amount||Interactive Brokers||E*trade||TD Ameritrade||Trade Station||Scottrade||Fidelity||Merril Edge||Schwab|
|$0 - $4,999||1.58%||8.44%||9.00%||8.50%||7.75%||8.58%||8.63%||8.50%|
|$5,000 - $9,999||1.08%||8.44%||9.00%||8.50%||7.75%||8.58%||8.63%||8.50%|
|$10,000 - $24,999||1.08%||8.44%||8.75%||8.50%||7.50%||8.08%||8.63%||8.50%|
|$25,000 - $49,999||1.08%||7.94%||8.50%||8.25%||7.25%||7.58%||7.50%||8.00%|
|$50,000 - $99,999||1.08%||7.44%||7.50%||7.75%||6.75%||7.08%||7.50%||7.00%|
|$100,000 - $249,999||1.08%||6.14%||7.25%||7.75%||6.50%||6.58%||6.13%||6.88%|
|$250,000 - $499,999||1.08%||5.14%||7.00%||7.25%||6.25%||6.58%||6.13%||6.75%|
|$500,000 - $999,999||1.08%||4.14%||7.00%||7.25%||5.75%||3.75%||5.88%||6.75%|
Accounts with more than $200,000 in equity can borrow up to $1 million at 1.08% per year and thereby control $1.2 million in stocks or bonds—a strategy that can increase one's cash flow by a factor of five times—if so desired.
Think about it for a minute. Some of the biggest market winners of the past two years have been mortgage real estate investment trusts (REITs) that borrow money at less than 2% and invest those monies in 4%-5% mortgages while exercising seven to nine times leverage to manufacture 15%-20% dividend yields. It's called "playing the spread," and the best names in the mREIT business have produced great returns from this formula.
But watch how YOU—the individual investor—can do the mREITs one better by using the same leverage technique for even bigger returns.
Take a highly diversified portfolio like that of Cash Machine, one with non-correlating assets paying a blended yield of 10%, and concentrated in assets that pay monthly. This provides a high level of capital stability which you can then leverage up by four times and overlay it with portfolio insurance to insulate against downside risk.
By deploying this leveraged "baby hedge fund" strategy in combination with a covered call strategy, a dividend capture strategy and a position trading system that profits from the moves dividend stocks make around ex-dividend dates, we are targeting powerful returns that rival the investment styles you find in the hedge fund world.
This is the most compelling aspect of Extreme Income. An approach once reserved for the one-tenth of 1% is now available to anyone who's got an appetite for big potential returns on equity by utilizing some special tools at a special time in history that may never be repeated again in our lifetime.
Click here now to learn how you can turn rock-bottom interest rates into a 40% real income windfall.
I hope to count you among the group who joins me in this once-in-a-lifetime opportunity.