Is it possible to safely double (or triple) your money in just a few years through investing?
The answer is YES…
You basically need just two things:
a) Amazing value, and
b) A bit of leverage.
(You also need to protect your downside risk. More on that in a minute…)
[ad#Google Adsense 336×280-IA]In the April 2011 issue of my True Wealth newsletter, two investments that I recommended are now up 88% and 232%, respectively.
I didn’t take on big risks to make those big gains…
All I did was have those two things above… and I protected my downside risk.
Specifically, those two recommendations were a health care stock ETF (up 232%) and a tech-stock ETF (up 88%).
(An ETF is an “exchange-traded fund” – it’s an easy way to buy a whole sector, as a stock ETF is a basket of stocks.)
Most important to me, the health care stock ETF held the biggest and safest names in health care… The top holdings were Johnson & Johnson (JNJ), Pfizer (PFE), and Merck (MRK). At the time, all of these stocks were incredible values, trading at single-digit forward P/E ratios.
The story was the same with the tech-stock ETF… The top holdings were Apple (AAPL), Microsoft (MSFT), and IBM (IBM) – the biggest and safest names in tech. Like the health care stocks, they were all incredibly cheap.
When you can find safe assets like these at super-cheap prices, it’s OK to use some leverage…
What is leverage? It’s debt… When most people buy a house, they take on incredible leverage… If you have 10% equity in your home, then you have 90% debt – or nine times the debt relative to your equity.
What I recommended in that April 2011 True Wealth was for readers to have leverage – through a double-long ETF. The goal is, if tech stocks are up 2% in a day, this leveraged ETF should be up 4%. And if health care stocks are down 1.5% in a day, then this leveraged ETF would be down by 3%.
Normally in my True Wealth newsletter, I don’t buy “leveraged” ETFs. I am looking for safe ideas.
However, if you can find incredible VALUES like we had back then… then it’s OK to take on some leverage.
In the case of health care and tech stocks, taking on leverage led to huge gains.
In order to truly make it a safe investment, you must protect your downside risk as well. I believed that the incredibly cheap prices we paid protected our downside risk significantly. However, we started out with a 25% STOP LOSS to protect us from a catastrophic loss. (Of course, we would hate to lose 25% on what we thought was a safe position. But we would have taken that loss if we had to… in order to live to fight another day.)
So can you safely double (or triple) your money in a few years?
Absolutely. We did it in my True Wealth newsletter…
You just need two things… Incredible value and a bit of leverage.
Not everyone will be able to do this… Most people are afraid to buy when we have incredible values (as usually things are going wrong, creating those great values). And most people are afraid of leverage through double-long ETFs. (That fear is good, by the way.)
You don’t want to do this all the time… but when values are incredible, you should…
Good investing,
Steve
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Source: DailyWealth