Passing The Bottom Of The Stock Market?
April 20, 2009 by Vagabond Investors · Leave a Comment
Have we finally seen the bottom of the stock market? We will know better by the end of this earning season. If the news continue to get worse, but the stock market refuses to make new lows, we will clearly see the foundation of a solid bottom.
So, if you are investing for the long term and you are not interested in the movement of the following months, by all means by the index and close your eyes for six months or so. Your investment could very well deliver its promise on a long time perspective.
As we look at the charts on a weekly basis, we clearly see how the price has moved from a significantly under-valued zone to the value zone. Note that the MACD histogram, which expresses the power of the uptrend, has reached a 10 year high! This tells how the market has been wildly optimistic and willing to buy. However, the wilder the party becomes, the more likely it is that there will be a hangover. It is very possible to see the index take some breath on the following weeks. It would be a healthy to retreat to around 740 points in order to gather strength to a new marvelous rally.
The daily chart shows how the index bounced from the bottom to tingle the upper level of the channel. In order to create a positive mood for the future, the bounce would have to reach the significant level around 870 and close above it. At present, the index is clearly above the value zone, where it tends to retreat to gather momentum. The rallies of the past days have not reached new short term highs.
Even the MACD histogram, which measures the power of previous power, has failed to make new highs. Instead it has fallen whenever there is a higher new high compared to the previous ones. This simply means the deceleration of the rising power. The struggle of the upcoming weeks shall be seen between 740 and 870. The result of that will show if there is basis for further bounce. Patience in timing purchases is no sign of being a sissy. It is simply sensible thinking.
It strongly seems that the longer trend is changing, but we could experience violent volatility during the upcoming weeks when new earnings are announced and the market gathers strength on slightly lower levels. If you are a short term trader, keep your stops tight and practice very prudent risk management.
The ride will be bumpy and it will offer tickly opportunities both on the short and long side. If you are planning a long term investment, it is desirable to make multiple enters to the market over time as this strategy will calm the mind.
I wish you pleasant investing. As always, let’s plan our moves carefully before we do anything.
Best,
Matias
Lessons In Wealth #1: Accept Responsibility
January 12, 2009 by Vagabond Investors · 1 Comment
Everybody faces problems, big problems. That is a given constant and nobody can escape it. The most important thing that separates the rich from the rest of the population is their attitude towards life.
The rich firmly believe that they create their life. They believe that its not what happens but how we respond that matters. We cant control all the things that happen to us, but we have absolute control over our response to what happens.
The poor believe that life happens to them. They believe that the external world dominates what we can do. This difference in attitude determines how we handle the inevitable problems of life.
When the waves come, we can choose to take responsibility or play victim. No one of us really is a victim. It is a role we have to choose. We need to understand that there is no such thing as a wealthy victim. Fulfilling, sustained and life-supporting wealth didnt just happen. Life doesnt just happen to us. We are participators and thus co-creators of our destinies.
How do we know if we are playing victim? Its easy and simple. Lets just take a look at our lives and see if we can find any clues of victim behavior. Consider the following.
1. Blame
Poor people tend to blame other people and circumstances that they are no rich yet. These same people really believe that the lottery tickets will solve their money problems some day. Probably they wont. Statistically most of the lottery winners back in the start square or in worse situation than before the lottery win in five years. Now thats something to think about.
The first step is to stop blaming and taking responsibility on everything that happens in our lives. If we are honest, we have contributed somehow to the problem. Its not that we chose to blow things, but we were part of the process. Lets accept it.
2. Justifying
The second typical victim behavior is justifying and rationalizing the situation. One common justification is that money is really not that important for me after all. Really? Is it not? Lets face it right now. Money is unbelievably important in areas in where it works and totally useless in areas in the areas in which it doesnt. When we need money, there simply arent that many substitutes.
Lets think about our loved ones. What if we choose to believe that theyre not important to us? Well he/she is not really that important. I dont really need a spouse anyway. Chances are they would not stay around for much longer.
Whether we like it or not, the same is true with money. If we believe that money is not important to us, we probably wont see much of it. The rich people admit and accept that money is important. They treat it as something important. They believe and behave accordingly.
3. Complaining
Complaining is passive aggression. We can complain as much as we want but its effect on solving our problems is exactly zero. Its a waste of valuable life energy. In our interpretation of the world, whatever we focus on grows. Whats wrong is always available and so is whats right. Which one we choose to focus on determines what we call our life. We are living magnets and we attract what we think most of the time.
The fact is that we can always choose between victim and victor behavior. To some extent, we are all choosing to be victims and victors. The key is to make a conscious choice to take the road of victors, that is, take responsibility.
We can always accept the situation as it is and take responsibility. We can either change the problem itself or change our perception of it. We can do something differently to solve the problem or at least we can try to find something we can learn from it. Blaming, justifying and complaining just wont work.
Remember, we create our wealth and non-wealth through our attitudes, thoughts and actions. Its not what happens but how we respond. As the saying goes, circumstances do not make a man, they reveal him. The choice is ours.
It always has been.
Matias
Two Simple Rules That Keep You In The Trading Game
December 15, 2008 by Vagabond Investors · 2 Comments
Money management and position sizing are probably the most misunderstood concepts in trading. We have only two goals in every single trade we make.
1. Make money
2. Learn
We can’t do both every time but for sure we should get at least one of them.
In my early days of trading I wasn’t aware of the importance of solid money management. In my opinion, it pays big money to take it very seriously. Money management keeps us in the game. It makes sure that we don’t get lethally hurt in any trade. I’ll run you through one simple and easy-to-use money management system, which I have used for several years.
The Rule Of 2%
The rule of 2% simply says that you never risk more than 2% of your trading account capital in one trade. I always – and I do mean always – follow this rule. If 2% seems a lot, I don’t have to ever risk that much if I don’t want to. I might choose to risk 0.5%, 1%, 1.5% or 2%. I never ever risk more than 2%.
So what does this mean?
Let’s look at an overly simplified example. Let’s say we have $100,000 in our trading account. We have found a very attractive trading candidate. We decide to enter this trade. The stock trades near its support level at $15.38. We figure out that a suitable stop-loss level would be at $14.12. Following the rule of 2%, how many shares do we buy?
The maximum loss we are willing to take is $15.38-$14.12=$1.26. On the other hand, 2% of our trading account of $100,000 is $2,000. We divide $2,000 by $1.26 (per share) and get 1,587 shares. Always round the number down never up. Include your brokerage fees and possible slippage in the 2%. So we decide to buy 1,500 shares.
One more thing we want to do here. We check that the total amount we put in the trade doesn’t exceed 25% of our total account. That would be $25,000 in this case.
The rule of 2% applies to any single trade I make. That’s very important. There’s another vitally important rule I wish to stress here.
The Rule Of 6%
The rule of 6% applies to my total open risk. It says that I never want to have more open risk positions than 6% of my trading account capital at the time. In other words, before I enter a trade, I check that my open positions in this new planned position don’t exceed $6,000, which is 6% of my $100,000.
Whenever the value of my account dips 6% below its closing value at the end of last month, I stop trading for the rest of this month.
Putting It Together
Here’s the idea of these rules. The 2% rule will keep me out from disastrous losses while the 6% rule will keep me out of long losing strings. Will I miss some fabulous opportunities as I follow these rules? Sure. It’s still vitally more important to follow the rules. Why? It keeps me in the game in the long run. It pays to have rules that keep you in the money tree year after year.
Let’s look at an example. Let’s say I make 30 horrible trades in a row, each of which loses the maximum following the rules I outlined above. I will still easily manage to protect over 55% of my trading capital.
|
Account |
MAX Risk |
Account |
MAX Risk |
Account |
MAX Risk |
||
|
100 000 |
2 000 |
81 707 |
1 634 |
66 761 |
1 335 |
||
|
98 000 |
1 960 |
80 073 |
1 601 |
65 426 |
1 309 |
||
|
96 040 |
1 921 |
78 472 |
1 569 |
64 117 |
1 282 |
||
|
94 119 |
1 882 |
76 902 |
1 538 |
62 835 |
1 257 |
||
|
92 237 |
1 845 |
75 364 |
1 507 |
61 578 |
1 232 |
||
|
90 392 |
1 808 |
73 857 |
1 477 |
60 346 |
1 207 |
||
|
88 584 |
1 772 |
72 380 |
1 448 |
59 140 |
1 183 |
||
|
86 813 |
1 736 |
70 932 |
1 419 |
57 957 |
1 159 |
||
|
85 076 |
1 702 |
69 514 |
1 390 |
56 798 |
1 136 |
||
|
83 375 |
1 667 |
68 123 |
1 362 |
55 662 |
1 113 |
Following these rules protect your capital. It gives you time and possibilities to learn from your trades. It gives you time to develop your trading system and setups. Combine this with a good record keeping and you will become a successful trader.
Although investing is one of my greatest passions, there are more important things in life than money. Personally, I’m about to have some more fun with my wife and daughter here in Thailand. I wish you all Merry Christmas and a Happy New Year!
Matias
What Is Lifestyle Design?
November 24, 2008 by Vagabond Investors · Leave a Comment
Times have changed. In the industrial age one needed to be a millionaire to enjoy the millionaire’s lifestyle. Back then the two could not be separated. How much you had money greatly dictated your way of life. Today, you can have the millionaire lifestyle without first having the million.
As analogical world became digital, much of the old rules became obsolete. Something disturbing emerged as the young generation became adults. Something fascinating and striking called Lifestyle Design began to take place.
What is Lifestyle Design?
Lifestyle Design is like tuning a car or tweaking a computer only that it is done with life itself. For example, you can tune a car to run faster with less fuel and look cooler. You can tweak a computer to make programs run smoother and crash less often. No more system resets in the middle of something important.
Similarly, you can tweak your life. You can make your life run smoother, eliminate unnecessary loopholes and have less often those “system crashes” that require you to reset your brain to be able to function again. You can tune your life to be cooler, more fun and more exciting.
Consider the following examples and analogies:
Car Computer Life
Consume less fuel Consume less disk space Consume less time
Run faster Smoother performance Less headache
Turbo charger Assistant application Personal virtual assistant
Automatic gears Automatic virus scan Automated income streams
More horsepower More processing power Massive action
Fewer engine crashes Fewer system crashes Fewer mental crashes
Transportation Computing Excitement
Many people run their lives without any Lifestyle Design whatsoever. They’re like a computer with tons of fragmented files on hard disk, too many simultaneous applications, not enough processing power, no virus scan, no firewall, slow internet and no manual. They then try to consume their way to happiness through useless stuff which they cannot afford. No wonder so many of us feel empty inside.
Lifestyle Design reverses it.
The purpose of Lifestyle Design is to make life much, much more exciting! It is actually a tool by which we can become wealthier. Wealth, in this context, refers to having income, time and mobility. It’s not just about money, although it’s fun, but excitement and time for the things we really love.
So how is it done?
It’s quick to apply and disturbingly easy to understand. In this category of our posts, we will share with you the experiments of our Lifestyle Design. You will find more and more ways to do less the things you do not want and more the things you do want. Yes, this applies to our work as well, although you might not readily believe it.
This category is a collection of Lifestyle Design tools ready for immediate use. We’re sure you’ll find them just as useful and enjoyable as we and our fellow vagabond investors. Let’s get started to tweak your life!
Jaakko & Matias
Blood On The Streets? Time To Make A Killing.
September 22, 2008 by Vagabond Investors · 3 Comments
The very best time to find new and profitable opportunities is when the market goes bad. In other words, when the news is full of gloomy data, it’s time to get excited. That day has come.
Successful investors keep on seeing opportunities when the markets are deeply in red and stormy clounds fill the horizon. Financially intelligent people see problems as opportunities. Solve a problem and you reap a profit. For example, Warren Buffet is looking for to buy some parts of Goldman Sachs on discount at the moment. While it’s true that you and I can’t put together deals like that, we can make other outstanding deals in the market.
How can an average person like you and me benefit from the down market?
First, identify the direction. It doesn’t matter which way the market is going as long as we can recognize it. Second, take proper action. For example, let’s say that you’re expecting the stock market to go down. You can buy put options, short ETFs or short stocks on sectors that are going down. This is just like buying call options, ETFs and stocks on a bull market. It’s just that now we’re doing it in the opposite direction. You have to let go of the obsession that you can only make money when the markets go up. The truth is you can make money in good and bad times.
Personally, I like bad times better. Public panic is more electrifying than public optimism. Why is that?
Down movements in the market are typically more aggressive than the up movements. They offer faster profits. If you’re like me, you prefer to have your profits sooner than later. Anybody who invested a couple of hundred dollars in the financial sector put options last spring has made tens of thousands in profits by now. Their total risk was limited to those couple of hundred bucks all the time.
How could these people see the coming crash of the financial sector?
Difficulties in the financial sector have been in the news headlines for more than a year now. It didn’t take a rocket scientist to find the companies that have been on a bad shape. After Bear Sterns was rescued and the mega bailout of Fannie Mae and Freddie Mac was announced, even the rest of us should have understood that the situation is going to get a lot worse (and it did). These troubles were clearly announced and it is a perfect example of a problem turned into a huge opportunity.
What about real estate? Do the same principles apply there too?
Yes! It’s no different. Forget the price speculation. Focus on the essentials. Keep looking for deals that give you positive cash flow. There is a sustained period of exceptional opportunities in the market! There are a lot of people who suffer and they’re desperately trying to get rid of their houses, because they’re late on their payments. They want you to buy their houses –at almost any price! Help them move on in their lives and make a fortune on the process. That’s a great way to help people. Think about it.
My message is simple. Keep your eyes open and try to figure out, what kind of opportunities Mr. Market is offering you today. It’s your job to find them, and the best news is, they’re always there! The deal of the decade comes along about once a week, if not more often. Now is the time to find your opportunities and take a GIANT step closer to financial freedom.
Now is the time to make big profits. There will come a day that the sun is shining again, and the best opportunities are gone. Are you going to say “I’m glad I did” or “I wish I had?” One these days you’re going to have to answer to that question.
Matias
Investments Will Not Make You Rich
September 3, 2008 by Vagabond Investors · 4 Comments
Dear readers,
I want to share something with you. I’m going to talk about a problem. In fact, not even a problem. I’m going to issue The-One-Big-Mistake-That-People-Make-With-Financial-Matters.
Please, pay close attention now.
The most common mistake people make with their money is that they think that their business or investments can make them rich. In other words, they think that stocks, bonds, mutual funds, gold, real estate, hard work or a good business can make them rich. It isn’t so. None of them can make you rich.
It’s not about what you have. It’s all about two things:
1. What you know about money, investing, business etc.
2. How you apply that information to benefit yourself and others.
This is exactly what we mean by financial intelligence. This is the key to a more abundant life. It is the only key.
We all face financial problems. Problems will never go away. The only place where you don’t have problems is the cemetery. Problems are a sign of life. They are hidden opportunities that challenge us to learn.
The only way to increase your financial IQ is to solve financial problems. The better you get at it the bigger problems you can solve. Bigger problems mean better opportunities to learn. Problems can be converted to income, if they are solved in a creative way.
The wealthy tend to think that each problem has a hidden opportunity in it. They turn their problems into questions. How fast can I turn this around? What can I learn from this?
We live in a world of cause and effect. We choose to do something and it leads us to some outcome. If you’re in a good physical condition, you’ve chosen something different from the individual who looks like a Michelin man.
Wealth is a result of specific causes. The lack of money is never the problem. It’s just an outcome of some causes that inevitably lead to it. It may be something as common as doing nothing. Many a problem has come about when good people have done nothing. That is an active choice as well. There are always lateral options to do something.
So what is intelligence? It is the ability to find causes behind desired results and act on them. We need both information and action. The ability to act is also called personal power. In most cases, wealth creation requires massive action in few critical areas. One of them is increasing your financial IQ so that you know what you should do in the first place. There is no more important investment than that.
Let me give you an example. Let’s say you have a stock portfolio which has taken some serious beating on the market. You decide to take responsibility (response-ability). You ask how you could have protected yourself from the downturn. You come to realize that you could have used protective stop-loss orders or change your strategy after noticing that the support level has failed. The options are virtually unlimited. Personally, I think that owning a stock without stop-loss orders is like having casual sex without a condom. It could be exciting and adventurous for a while but there comes a day that things will go seriously wrong.
How do you increase your financial IQ? The quickest way is to study the subject. Go to the market and get some experiences (might be learning experiences at first). Then analyze it. Ask good quality questions and learn from your experience.
Focus on one asset class at a time. Find a working strategy, keep learning until you master it, and then learn a new one. Then open your mind for a different view on some other asset class or instrument.
For example, you can start with long-term buy-and-hold real estate deals with excess cash flow as your goal. You can then move to flipping houses, if that catches your attention. You could turn to trading stocks or building automated businesses. The game of money is fantastic, because there are zillions of ways to make a ton of money and have fun doing it! Expand your view. You can never learn less.
I hope this clarifies that it’s not about the investment but the investor. The investor is far more important than the investment. Ultimately, all profit and risk lie on the investor, not the investment.
Take care!
Matias
Reality Check: Lessons in Shaping Your World
August 24, 2008 by Vagabond Investors · Leave a Comment
Your reality is different from other people’s realities. We live in the same world only in a geographical sense. That sounds like a harsh statement. I know and I agree. Thanks for your support. Let’s look at how our reality is constructed and what we can do about it.
The world is full of information and stimuli, which is filtered in our minds. Only a small fraction of what we sense is coming through. Do you remember the last time you bought a car? Did you notice how many similar cars were suddenly in the traffic jam with you? In the same way, babies seem to pop up everywhere when you hear that you (or your wife) is pregnant.
Hold on. The cars and babies were always there, right? How come we didn’t notice that?
First, our conscious mind is only capable of accepting things that grab our interest. In the face of tragic news, we find it hard to accept the circumstances. The first reaction is to say that what has happened is not true! It can’t be, we think, but it is.
Second, our mind is constantly looking for ways to support the beliefs that we have created. We find evidence to support whatever we have chosen to believe – in a conscious or an unconscious way. Most things that we don’t believe in get little attention from our minds. We literally do not see them.
Imagine you live in a world filled with possibilities. Imagine virtually everyone you meet wants to help you. This is world is a projection of a mind which has prosperity consciousness. If we choose to believe in it, it’s a very different world from somebody else’s “reality” if they happen to think exactly the opposite. They might believe that the world is constantly becoming a worse place to everyone living in it and that people are only there to serve their own selfish interests with little caring to anybody else. They have what is called a scarcity consciousness. Our beliefs literally shape the world we see, touch, smell, hear and taste.
Third, our fears shape our thinking. Fear gets our full attention in such a way that all other things are wiped out of the conscious mind. Let me give you an example. Suppose you knew beyond a shadow of a doubt that you would be in a terrible accident this week. Do you think it would affect the way you think of your upcoming sky diving course or rock climbing session? I bet it would. You would probably be so afraid of it that you would miss out on most of the positive things in your life. You see, fears shrink us. Fears make us live a smaller life. When we do the thing we fear, the death of fear is certain. Therefore faith is the key to a bigger life.
Just in case you should say think that the world is a terminally boring or unsafe place, let me tell you something. That’s the good news! It’s all in your mind! You have the power to shape your thoughts, beliefs and fears. There is no “out there” out there. There is no the state of things as they actually exist. Your mind represents (re-presents) everything!
You are not in control of the outside world but you have total control of your inside world. We don’t see situations as they are. We see them as we are, that is, as we see ourselves.
Give these ideas a little room in your mind this week and see if you could see a new world. See if you could become more sensitive to the heart beat of life. You can respond to the world with your new thoughts, new beliefs and new faith. Try it out for just this week!
Matias
Why Paying Down Debt and Saving Money Is Stupid
July 3, 2008 by Vagabond Investors · 5 Comments
It’s everywhere. The newspapers, TV shows, you name it. People and institutions have too much debt. Savings rate is low. Recession raises its ugly head and the consensus is starting to feel fearful. Panic is not far away. Then come the financial advocating a message that is familiar to most people: “Pay down all your debt and save money.”. Some disregard it, some believe it and some - like us - think that it’s not good financial advice. How can we say that?
We have a different philosophy on debt. You see, we happen to like debt. There is a radical difference between good debt and bad debt. Simply put, good debt makes you rich and bad debt makes you poor. This distinction is critical and it can make the difference between getting rich or falling behind.
For example, if you buy a leveraged investment which pays for its own debt, it would be considered good debt. Then again, if you buy stuff that goes down in value and does not pay for its own debt, it is bad debt.We like good debt and we do not believe you should get rid of it. After all, it’s one of the best ways to leverage investments.
We do think, though, that it makes sense to pay down your bad debt. Debt is like a loaded gun. It should be respected on all circumstances. It’s always potentially dangerous. Yet it makes a big difference whether you aim the gun on the target or on your own foot.
In order to use good debt in a correct manner, check your asset allocation. It is the most important thing you should do right now, if you have not done it already. Do it now.
What about savings? Don’t we think that saving money is a good idea? After all, most people are not saving money and that is a big problem, right?
No, I wouldn’t say so. Not for the new rich, anyway. A currency is designed to lose value. Inflation is running high. Although we believe that the numbers are manipulated, even some 4% inflation will do serious damage to your savings. The problem is that central banks can print money faster than you can save it. They are doing it all the time. Instead of saving money, we once again recommend you check your asset allocation.
Don’t try to avoid risk by saving money. Learn to manage risk and invest money. It should be relatively safe, profitable and fun too! The next time you hear financial advice that states that you should pay down all your debt and save money, think if you can be smarter than that. It all comes down to financial intelligence.
Remember, you can never learn less. That’s why we have given you this blog to read. The safest and most profitable investment of all is to raise your financial IQ. With it all is possible, without it nothing is possible in the game of money.
Until next time,
Jaakko
The Leverage of Your Mind (Plus: How to Create Supreme Ideas)
June 26, 2008 by Vagabond Investors · 5 Comments
The greatest leverage of all is the leverage of your mind. The six inches between your ears is definitely your most valuable asset. You have no idea what you are capable at. Your brain is so complex and so powerful that you are only using a small fraction of its capacity. The limit of better quality life is not out there. It is in your mind.
What is reality? Simply, what we think is real, is our reality. It’s not how things actually are, it’s how you perceive them to be. A good example of this is if you think you can’t afford something. We all do this once in a while. The reality is not that you can’t afford it. It’s just that the thing you pursuit is outside of your current reality, i.e. you don’t know how you could afford it.
It’s not money that makes people rich. It is the ability to expand the reality that ultimately makes people richer. Money is not the solution to money problems. The mind is. It is the cure-all. Any constraint in the outside world can be overcome with creativity. The ultimate resource is resourcefulness. The reality is a mind game.
A large part of what we call reality is constructed on our beliefs. A belief is nothing more than a feeling of certainty. We have beliefs of life, ourselves, people around us, money, our abilities, everything. The big realization is, of course, that none of these are true. Belief systems are all fundamentally false. Yet the human mind inevitably constructs beliefs to perceive the world. The good news is you can change your beliefs. You can change your reality.
Many arguments in life are caused by differences in reality. People don’t really argue about things themselves. What they argue about is their realities that collide against one another.
You have to ability to choose your reality. The way that you are constantly doing this is by focusing your mind. At the moment, you are focusing on this. Yet at the same time, your heartbeat in your left ear is just as real. Were you aware of it? Chances are that you weren’t. That’s because you didn’t focus on it. Wherever focus goes, energy flows.
As to creating a better reality, you have to solve some problems. Problems will never go away. They are a sign of life. Getting rich is a matter of having better quality problems. From too little money you can go to having too much money. Both realities are possible and both problems are real. Yet the difference in quality of those problems is enormous. One comes from scarcity, the other from abundance. Wealth, after all, is all about abundance. It’s about a better reality and better problems.
The question then becomes, how do you change your reality? The answer is, by solving problems. That is, by answering questions. Problems are questions, aren’t they? That’s a question, too. Isn’t it?
To solve better problems ask better questions. Better solutions mean better ideas. Ideas are the doorway to new realities. For example, don’t say “I can’t afford it.” I contend that it’s a sign of mental laziness. Ask “How can I afford this”.
I’ve listed some good and bad questions below to let you see the difference here.
Bad question Good question
Why don’t I have any money? How can I make a ton of money and have fun doing it?
Should I work longer hours? How can I increase the number and size of my assets?
Who’s to blame? How can I turn this around quickly?
What’s wrong with my life? What’s right with my life?
How can I earn more? How can I earn more and work less?
Turn your problems into questions. Focus on finding solutions. Spend a maximum 20% of your time and energy on problems and at least 80% on solutions. This alone will yield supreme results in your reality.
Expand your reality by reading and listening to people who already have achieved what you want to achieve. Raising financial IQ is all about the leverage of your mind. The fastest way to become financially independent is to be able to change your realities faster. If you want to progress quickly, you need to have an open mind to new ideas and have the skill to take on possibilities greater than your current abilities.
Reality is negotiable. Expand the limits of your reality. Earl Nightingale put it eloquently: You become what you think about most of the time.
How do you create superior ideas? I’ll give you a quick guide to something that has worked like a miracle to me. This method is worth its weight in gold.
1. Gather raw material for your ideas. Get specific material as well as general. Try to find quickly as much as you can. Work consistently and don’t give up. File the material to notebook or a computer file. I personally prefer a notebook. I clip pictures and everything that relates to the problem and put them to the pages of my notebook.
2. Work it over in your mind. Ideas are just new combinations. Take one fact and look at it in different angels and lights. Bring two facts together and see how they fit. First you will get partial ideas. Keep on generating new ideas even if you think you can’t find anything more.. Write them all down regardless if they sound a bit silly.
3. Let go and forget your puzzle. Do something totally different that stimulates your imagination and emotions. Take a shower, listen to music or exercise. I like to train muay thai, krav maga, Brazilian jiu-jitsu or some other combat sport to empty my mind.
4. An idea will appear out of nowhere. This will happen when you least expect it. In the middle of something else, you suddenly get the solution or a brilliant partial one.
5. Bring your idea into the reality. Develop your idea with other people. Submit it for criticism. Shape and develop the idea to practical usefulness.
There you have it. The leverage of your mind is the most powerful form of leverage there is. All you need is within you right now. Keep on increasing your financial IQ. You will find that making superior deals to finance your lifestyle and creating automated income streams through all three asset classes become easier and easier. With cash flow and time, everything is possible.
Jaakko
