By Kris Sayce, editor, Casey Daily Dispatch
“I don’t touch the stock market. It’s just gambling.”
We’ve heard a lot of people say that.
We’re sure you have, too.
The thing is, it’s not true.
The stock market isn’t like gambling – it’s far more profitable.
And what’s more, over the medium- to long-term, you’re almost guaranteed to win with stocks. The opposite is true for gambling…
Here, we’ll show you…
Before we do, if this is your first time reading the Dispatch, welcome. If you’ve been here before, welcome back.
At the Dispatch we have two goals:
To introduce you to the most important investing themes of the day, and
To show you how to profit from them.
We do this by showcasing ideas from our in-house investing experts, Dave Forest and John Pangere. And the founder of our business, Doug Casey.
For today’s Dispatch we’ve made a big claim. So we better deliver the goods.
This Shouldn’t Be a Controversial Idea
Done the right way, the stock market isn’t like gambling at all. Even the people who say that will probably back down once they think about it.
Our second claim – that you’re almost guaranteed to win with stocks – sounds more controversial. And yet, it shouldn’t be.
We’ll show you what we mean…
The fact is, anyone can make money from stocks. It’s just a matter of how much you hope to make, how long you want to wait, and the risks you’re willing to take.
Let’s start with what many would consider the lowest-risk way. An index fund or exchange-traded fund (ETF). You have a starting pot (large or small), and then make regular contributions.
Simple. And effective.
Here’s how it turned out if you’d invested just $100 in the S&P 500 in August 2000 (at the peak of the market), and then invested $100 each month thereafter.
According to this neat website dqydj.com, over 21 years the total amount invested would be $25,600.
That’s $100 per month for just under 21 years. By November 2021, your portfolio would be worth $97,713.
That’s a 11.2% annualized return.
That’s not a bad return for doing nothing – and during a period of three market crashes. Now, to be clear: Just because we say you’re almost guaranteed to make money from stocks, doesn’t mean the value of your investments won’t fall.
Any investor knows that stock prices don’t go up in a straight line.
The point is that if you want a no-hassle, 11.2% annualized return, that’s not a bad way to do it.
One of the Most Lucrative Plays on the Market
Now, show me a gambler, who with the same “zero effort,” can pretty much guarantee to triple their account over 21 years.
It’s not possible.
(Gamblers will say that blackjack has a great win rate at casinos. That may be so… for experienced gamblers. But it’s not a “zero effort” return.)
Perhaps now you’re thinking, “If it’s that easy, why bother with individual stocks and investments at all?”
There are two reasons. First, most folks don’t put a gradual approach like this into action early enough to make it worthwhile. Or they don’t realize how effective it is.
The second reason is partly tied to the first reason. Whether through choice or need, most investors want to make more than 11.2% per year… and they want to do it in less than 20 years.
That’s where individual investing ideas come in. By venturing outside the relative safety of the S&P 500, it’s possible to find bigger gains… and to achieve the results in a shorter time frame.
It’s the main reason investing expert Dave Forest has pounded the table so hard on one of the most lucrative plays in the market.
And no, we’re not talking about cryptos (although some of the gains Dave has bagged for his subscribers are crypto-like).
But these aren’t ordinary stocks. It’s a special kind of security called a “warrant.”
The Same Return With One-Tenth the Risk
The beauty of warrants is that they give investors the chance to benefit from the performance of a company, without investing directly in the stock.
What’s more, because the warrants typically trade at just a fraction of the price of the related stock, you can invest much less than you would invest in the stock.
For instance, one of the best performing warrants plays in Dave’s investment service was mattress company Purple Innovation. That’s right – a mattress company.
From February 2019 to October 2020, the stock gained 431%. That’s a good return… some might even say great.
It turns every $1,000 invested into over $5,000. That’s certainly better than a measly 11.2% return.
But while that’s good (or great), the Purple Innovation warrants did better.
During the same time frame, they gained 4,942%.
That would have turned $1,000 into more than $50,000.
But warrants do have some risks. They’re more volatile, and they have an expiry date. So the best way to play something like this is to manage your risk by investing a smaller amount.
Rather than investing $1,000 in the stock, and losing it all if things don’t play out… you can invest, say, just $100 in the warrant.
That’s much less money to risk. However, just that small amount in the Purple Innovation warrants would have turned into over $5,000. In other words, you could make the same return as buying the stock, but with much less capital at stake.
Just one-tenth the risk, in fact.
This is the great thing about warrants. You get the opportunity for big investing gains – without taking unnecessary risks. And it resulted in a 50x gain in less than two years.
Do you see? That’s just one of the lucrative opportunities available in the stock market. It’s not gambling. It’s sensible investing.
It’s measuring the risk, the potential return, the desired time frame, and then making the appropriate investment. (Warrants are also a great candidate for a column in our “10 x 10” Approach to investing.)
If you haven’t yet checked out this type of investment, you’re doing yourself a disservice. Take a few moments. Check out the details here. Dave explains everything you need to know to get started in warrants today.
Editor, Casey Daily Dispatch