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When it comes to money… you need a plan

This starts with having a budget. 

The most common budget advocated by experts is the 50/30/20 rule.

This budget divides your take-home income into three categories: 

  •     50% for needs.
  •     30% for wants. 
  •     20% for savings, investment, and debt repayment.

Let’s talk about the investing element.  

I think it’s important to use a similar “rule” to break down investment decisions. 

50/30/20. 

Each category will have its own qualities and characteristics. 

I’m going to show you the breakdown I use to invest and build real wealth.

I’ll even throw in stocks that fit each category for a portfolio.

Let’s dive in…

Get in The Money

You’ll hear a lot about asset allocation if you’re just starting out investing. 

Typically, this is reserved for more passive, “Buy and Hold” investors. 

For example, you might invest 50% of your money into safe mutual funds, 30% of your capital into Blue Chip stocks that pay dividends, and then 20% into growth stocks that are historically volatile but have a serious upside. 

This strategy is something that many brokers will enact and hope you never call their office. It’s very boring. It’s susceptible to wild market swings. 

And it’s not something that beats the market on a regular basis.  

But I’m an ACTIVE INVESTOR

I don’t just buy, sit around, and wait. 

I don’t just buy stocks at market price and then sit around and wait. 

I want to squeeze every dollar possible from every stock purchase. 

I want to maximize my dividend payouts so I can reinvest all quarterly payments back into my portfolio.

And I use conservative options strategies to help boost the upside of my trades.

Let’s take a look at the three buckets of my more Active Strategy. 

Bucket One: Value Investments and Mispriced Stocks

Take the first 50% of your investments and put them into value investments that can pay off over the long term. Here I’m focusing on beaten-up stocks that are ripe for a turnaround. 

Today, there are many beaten-up stocks.

But I screen for financial health, strong management, manageable debt, and an outstanding growth thesis. 

I don’t speculate with these picks. 

I want to lock in strong, solid dividends that will continue to pay in the future even at today’s higher rates should the stock continue to rise. 

A recent example of a stock I owned that met the definition of value was Wynn Resorts. 

The best-in-class hotel and casino operator plunged from $153 in January to the mid-70s in May. Blame COVID. 

But it’s hard to find a better run casino than Wynn. 

It’s not only one of the most dominant names in Las Vegas, but it is a leader in Macau, China, the largest gambling center in the world. 

In fact, it generates 76% of its revenue from that high-growth market. 

I bought Wynn stock back in May at $78.00 per share. 

Following Monday’s rotation from growth to value stocks, shares of Wynn surged to more than $102. 

In a few months, I earned 31.2% on one of my favorite value stocks.* 

It takes a little bit of patience with the first 50% of the portfolio.

But give these types of positions time. The market will reward you.

Bucket Two: Tap Into the Growth Trends of Tomorrow

Next, I’m putting 30% of my money in growth stocks tied to megatrends. 

These are companies tied up in sectors that were hot before COVID, hot during COVID, and will become titans of industry AFTER COVID. 

Ecommerce, digital education, online gaming, data and analytics, data storage, and the latest hot tech all fit the definition of such trends.

Let’s talk about one company that taps into incredible trends.

Earlier this year, I bought Advanced Micro Devices (AMD). 

The company is a producer of semiconductors central to the advancements of the latest growth industries like 5G, gaming, IoT, and more. 

AMD has been one of the best growth stocks of the year. 

And shares treated me well within my allocation model.

I bought shares in July at $54.70. Then I sold them in September for $77.00 per share. In less than 60 days, I earned a 40.7% gain.*

I don’t just buy and hold for the short term. I’m looking for stocks that are going to rip higher thanks to strong momentum and bullish sentiment.

Of course, not every growth stock is going to be a winner. 

But I can use trailing stops and other risk reduction strategies to protect my capital in every trade. That limits my downside on some trades…

And it allows the best performers to OVERPERFORM in the right conditions. 

Bucket Three: Buy What You Want, When You Want

Finally, I’m placing the last 20% into stocks that are above my current price range. 

I’m going to use very conservative options strategies to pick the price I want to pay for the stock and get paid to wait for it to pull back.

This is really simple. How many times have you said to yourself?

“I’d buy this stock if it were 5% or 10% lower?” 

Well, that’s’ where we use a conservative options strategy to pick the entry price on the stock I want to buy. 

You don’t have to sit around and wait. Instead, you can sell puts on the stocks you want to buy and collect cash while you wait for the pullback. 

I laid out an example of this trade earlier this week. But pick any stock that you might like. 

For example, take AT&T Corp. (NYSE: T). This is one of the most reliable dividend stocks on the planet, as it’s raised its payout to investors for more than 25 years in a row. 

Over the last two weeks, shares have popped more than 9%. 

And the stock now pays out a 7.1% dividend. 

Did you miss the rally? Well, instead of waiting for the pullback or buying the stock now, you can set aside some cash and sell put options on the stock. 

For every 100 shares of AT&T that you want to buy, you can sell a put contract at the entry price of choice. Instead of buying up the stock today, you can sell a put contract and park the money to wait for any pullback.

You could set an entry price of $28.00. You can sell January 15, 2021, $28 Puts for $0.77. You’ll get the premium times 100 shares. 

That means you’d be paid $77 for every 100 shares you want to buy while you wait for the stock to dip.

If the stock doesn’t decline, you’ll get to pocket the money by the expiration date. 

If the stock falls to $28.00 or less, you can purchase the stock – all 100 shares – at the price you wanted to pay. 

And remember your breakeven price in this scenario is actually $27.23 per share. 

So, if the stock falls to $27.60, you’ll still end up making money on the trade.

To me, this trade scenario is Win, Win, Win.

I used this strategy to earn the following gains: 

  • A 70% ($2,600) on AT&T in five days…*
  • A 59.9% return on AvalonBay puts…* 
  • A 26.8% gain on Amgen puts.* 
  • A 55% ($1,010) win this week on Wynn Resorts…*
  • A 79% win ($1,555) on Visa this week…*

Get Active with My Portfolio Accelerator

We are coming out of a recent financial crisis, and we might be facing yet another massive rotation of stocks as investors try to determine the economy’s path forward.

I’m very confident in this strategy. It’s a reliable way to cover the upside of value and growth stocks… all while giving me the power to squeeze every percentage gain possible out of my portfolio. 

If you’re interested in seeing more on how I do it, remember, you have until Midnight to accept my rare offer to join my service for 90 days

I’d be stunned – for a $299 price – if this didn’t pay for itself in the next three months.

*Results presented are not typical and may vary from person to person. Please see our Testimonials Disclaimer here: https://ragingbull.com/disclaimer

 

Author:
Jeff Bishop

One of the best traders anywhere, over the past 20 years Jeff’s made multi-millions trading stocks, ETFs, and options. He is renowned as an incredible trader with a deep insight and a sensitive pulse on the markets and the economy. Jeff Bishop is CEO and Co-Founder of RagingBull.com.

Even greater than his prowess as a trader is his skill and passion in teaching others how to trade and rake in profits while managing risk.

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