What constitutes a high rate of return? It all depends on your time-frame really, but most people neglect to consider not only the duration of investment but also the exit strategy. Not knowing how to convert a high rate of return into useful cash flow streams is the fundamental flaw most investors have today.
Learning from the Lessons of Warren Buffett
Warren Buffett has always been thought of as the “Oracle of Omaha” in being able to determine how to get the most return out of an investment. People always think of him as “that rich old guy that buys insurance companies” but where Warren really excelled was not in stock market gains but in converting investments into cash flow streams.
There were many occasions in Buffett’s early investment career in which he invested a chunk of money to buy control of a company in order to re-organize how the company managed and invested its cash. The end result being an increase in cash flows (OUT) to the owner (him – that is, Buffett). Far too many people investing in the stock market or other markets today seek big stock price rises in the hopes of a single big payday – with the thought being that “that’s what Warren Buffett does.” The truth of the matter is that the real gains – the high rate of return investments are the ones where you can buy controlling interest in a company or set of cash flows and rearrange them in a way that more cash comes out than before.
They offer a high rate of return to the CONTROLLER of the cash flows.
Earning a High Rate of Return in Today’s Markets
There are still a few ways to earn a high rate of return in today’s markets without necessarily buying controlling interest in a company (though doing so is probably a higher probability endeavor if you can buy cheap!). The way to increase your ROI in today’s markets IMO is to minimize your duration exposure. Everyone feels like the global economy is a bubble (and they would be right!) ready to burst. YET – markets continue to rise and fall within ranges. How then to earn as high rate of return as possible while limiting the time duration investments are held?
For my money, the answer appears to be binary options. These contracts are the shortest in nature (some as short as 15 minutes), offer fixed high rate of return (60-80%) and require only one-side market timing (a.k.a you only need to know the direction of the market – up or down, not how high or low it will go). I suppose the next best type of investment to earn a high rate of return would be standard options contracts with modest duration and deep in the money… but that’s the formula of another investment guru Lenny Dykstra. I’ve had excellent success with that method over the years – but you do have to make exit plans as well. Exit strategy is not necessary with a binary options trade.
