This week we’re back to burritos. We’ll talk a bit about Options from the viewpoints of the greats and give a bit of an introduction to next week’s discussion of Options. I remind Danielle that you need to walk before you can run, and she reminds me of her investing-based childhood. We’ll also delve into the different types of investing and the different types of investors.
In Episode 167 You’ll Learn:
Why are we talking about Options?
- You can use options to protect the profit you’ve made from a company
- Warren Buffett isn’t nimble enough to move in and out of companies the way smaller investors can
Three Investing styles:
- A 20-year-old with a stable job investing in the index at 10% of their income
- Comfortable retirement – You have to have a lot of time to make this work, but this is the style that is always pitched.
- An individual with lots of time and doesn’t want to work forever; or an individual without much time or money.
- Investing in wonderful companies when they go on sale will be the most beneficial.
- A 55 yr old without enough money to ever retire
- This person will need to be more aggressive and take more gambles.
Three Categories of Investing
- The Generals – basic stock investing; investments where we have a disparity between price and value.
- Controls – taking over a company; owning it; most of us don’t have the capital for this.
- Special Situations or “Trades” – this is where options fit in.
- Allows us to take the profit we make from the company off the table and buy back into the company at a cheaper price.
- Options on the index are essentially bets that the economy will improve; it is a form of speculation where 99% of people are losing money because of a lack of education on how to do it successfully.
- Phil and Danielle recommend:
- “Investment Biker” by Jim Rogers