This Simple Investing Strategy = NEVER WORKING AGAIN

In this video we are looking at a simple and straightforward investing strategy that has the ability to create enough income to allow you to never work again AND you can do it for a lot less than normal retirement balances.

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700 Shares of the S&P 500. Yep, you read that right. All you need is 700 shares of the S&P 500 ETF SPY and you are likely set for life. Let me explain. I am going to make an assumption that the Average Joe can live on $50,000 Gross Income per year. That could be more or less depending on where you live and your level of monthly expenses. 700 shares of SPY would cost you approx. $278,000 if you were to go out and buy them right now. Now, $278,000 is a lot of money for sure and it could take you sometime to get to that level, but that is a lot less money than most people would say you need to retire or stop working. Let’s look at the math.

SPY pays a dividend of $6.18 per share. That equates to approx. $4,326.00 in annual dividend income. That’s not enough. You could also decide that you are going to sell shares of SPY every month to fund your monthly expenses and that could work if SPY continues to appreciate every month. The problem with selling shares to fund your retirement is that sometimes the stock market goes through periods of underperformance. Stocks go down in value and this is the worst time to end up selling shares of your investments. It is known as sequence of returns risk. It is problematic for a portfolio of $250,000 as well as for a $1,000,000 portfolio. Selling shares at low prices can drastically reduce the longevity of your portfolio and could cause you to run out of money and have to go back to work.
$50,000 in annual income is $4,166.67/month and $961.54/week in income. Remember SPY pays approx. $4,326/year in dividends which means we only need to generate $45,674/year. Did you know you can safely generate this much income every year AND participate in the growth of the stock market?
You can do this by selling covered calls on the S&P 500. A covered call is a simple investment strategy that can generate quite a bit of income. A call option is a contract that allows the buyer of the option the opportunity but not the requirement to buy shares of an investment at a specific price for a set amount of time. The seller of the option is obligated to sell shares of an investment for a defined period of time if the price of an investment is reached.
For example, let’s say that the current price of SPY is $397/share. Let’s say you believe it’s unlikely that the price of SPY will go up to $403/share in the next 7 days. Every option contract is worth 100 shares of the investment. You could sell an option contract expiring in 7 days that would require you as the option seller to sell 100 shares of your investment in SPY to the option buyer. This contract would be worth approx. $150 right now in the options marketplace. That $150 per contract would be paid for by the option buyer and given to the option seller.
Now in this scenario, one of 3 things will happen with this option contract and SPY:
#1 The price of SPY will be below $403 in 7 days
#2 The price of SPY will be exactly $403 in 7 days
#3 The price of SPY will be above $403 in 7 days
In any of these scenarios you get to keep the $150 that was paid to you. In scenario #1 the option contract expires worthless. The buyer no longer has any claim to your shares. In scenario #2 there is no real value to the contract as the buyer could either get the shares from you or buy them in the open market from somebody else. And, they paid $150 for this contract so they still technically lost money. In scenario #3, you would need to sell the shares of SPY to the buyer. If you had initially sold 1 contract, then in this scenario the borrower would receive 100 shares of SPY at $403/share. You would receive $403/share x 100 shares = $40,300 for selling your shares. You could then go buy 100 shares again of SPY and repeat the process.

This communication/content is for informational purposes only and is not intended as personalized investment advice, tax, accounting or legal advice, as an offer or solicitation of an offer to buy or sell, or as an endorsement of any company, security, fund, or other securities or non-securities offering. This communication should not be relied upon for purposes of transacting in securities or other investment vehicles.

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