He mentions ties to many Americans and they yawn. The word “link” suggests a safe but long and dusty path to unexciting gains. And aren’t ties complicated?
The answer is no. Most Americans are wrong about bonds and they need to take a second, deeper look at this extraordinary market.
When most people mention bonds, they mean the sale, or auction, of US Treasury bonds of various maturities – 2, 10, and 30-year notes, to name a few. These investments are backed by the US government and are therefore considered a safe haven in times of uncertainty. These investments are generally held for a long period of time and are only one part of an investment portfolio.
But in an ever-changing economic environment, where interest rates can rise and fall rapidly, there is a better way to use bonds. Consider the US Treasury bond futures and options market, which is traded on the Chicago Board of Trade.
The price of the US Treasury bond changes almost every trading day. Professional traders know this and can choose to exploit these moves to earn small but steady sums of money.
Homeowners who want to cover the cost of buying a home or other real estate can also learn to exploit this market. And it will only cost pennies a day to learn how to do it.
Consider this simple example. Homeowner pays a mortgage of $ 1,500 a month. You would like to make extra payments to get your 20-year mortgage paid off early, but you don’t have the extra cash flow. So you decide to learn how to trade options or futures on US Treasuries.
After a little study Homeowner start earning $ 150 per month in trading options. Nothing to brag about. But hey, it’s a new stream of income and it’s disciplined: every month you put in $ 150 towards your mortgage and at the end of the year you have paid an additional $ 1,500. Do you see what he has done? Without looking into his own pocket, he made an extra payment on his mortgage.
Remember this: Additional payments can save homeowners thousands of dollars over the life of their mortgage.
But it gets better. What if next year Owner business skills improve to $ 200 or $ 400 or $ 1,000 per month?
Can be done? Yes. But only if you accept rule number one: you must LEARN before you WIN.
What do US Treasury bond futures and options have to do with home ownership? Everything.
First, anyone who decides to buy a home immediately worries about interest rates. Are they historically high or low? Mortgage brokers monitor loan rates on a daily basis in order to secure the best deal for their clients.
But that’s just the beginning.
Buying a home can be the biggest investment and risk that most Americans make. They work their whole lives to pay off the mortgage in the hopes of being able to borrow on their equity (to finance their children’s education, for example) and one day sell their house for a big profit.
Despite the recent zeal for real estate, not everyone gets rich in the process because no one can control the economic environment. Even when home prices are high, homeowners may not want to sell to reap the profits. “Why sell? I have to live somewhere”, is the phrase that is often heard. Let’s face the facts: It’s not so easy to take root just because the market is favorable for sellers.
Also, despite the accepted wisdom of owning a home, buying a home is not necessarily an investment. It’s a big responsibility, according to Robert Kiyosaki, the best-selling author of the Rich dad poor dad investment book series.
Now compare the enormous risk and concern of home buyers to trading in Treasury options, for example, on the Chicago Board of Trade.
Do you need a bank loan? No. In fact, it is unwise to exchange borrowed money of any kind.
Will you keep your position for decades? No. In some cases only days.
Will you invest hundreds of thousands of dollars? You can, but you don’t have to. Some options trades risk from $ 300 to $ 600.
Will it take years to see your capital grow? A qualified trader can raise capital every week because the market is very liquid. You don’t have to be a day trader to earn constant sums of money, if you learn a new skill.
Will you have the opportunity to profit quickly, buying and selling, as interest rates go up and down? Yes. That is the point. Some real estate investors brag about “selling” a property, meaning they buy or opt for a property only to sell or “sell” it within 30 days for quick profits. But that is complicated and involves banking applications, etc. When you “invest” or trade contracts on the US Treasury market, you do not need permission from a bank. You call your broker or place a trade through an online account.
And unlike real estate, which requires a bull market to be successful, in the bond market you have the potential to make money whether the economy is going up or down, hot or cold. The transactions are simple. But what is the first rule?
You must LEARN before you WIN.
Copyright 2007