Rich Dad Education Blog

"Profiting in Volatile Markets"
November 19 - 20

At our last iConference in July, I warned you about the crisis that was coming in our economy.

At this FREE iConference, I want to tell you what I think you should do now that it's here.

Mark your calendar, my presentation is on Day 2
(November 20th, 2008) at 10:00 AM ET.

And I'll be joined by an outstanding team of experts including:

• Steve Forbes, Chairman and CEO, Forbes
• John Buckingham, Chief Investment Officer, Al Frank Asset, Management and Editor, The Prudent Speculator
• Janet Brown, Editor of NoLoad Fund*X
• And Many, Many More

PLUS! Visit the Rich Dad's Education Virtual Booth at the iConference

And discover the many resources we offer to boost your Financial IQ. Remember, in troubled times, your Financial IQ is your most valuable asset .

Once again, to register for this FREE iConference, click here.

To Getting Smarter with Your Money,
Robert Kiyosaki

PS: This is information I think You MUST Have to SURVIVE & PROSPER in the Days & Weeks Ahead!

Click here to Register! Remember it is FREE!

Posted 11:23 AM | Permalink | Comments (0) | TrackBacks (0)

Rich Guide Answers

Question: The economy is tough and even previously reliable tenants are now having trouble paying the rent on time. How should a landlord deal with it?

Answer: These are difficult times. While you want to be compassionate, you still need to operate your real estate investments with good business practices. Continue to enforce all of the terms of your leases, including late fees and other collection policies.

If you have multiple properties or multi-unit buildings, one option that may work is to move a tenant who has hit hard times to a lower-cost unit. If the tenant is still able to pay every month but not on the same date, consider revising your rental agreement to change the due date. Have your attorney review the new agreement before you sign it.

A reality in this business is that sooner or later you will likely have to evict a tenant for nonpayment of rent. It's not pleasant, but it comes with the territory when you own rental properties.

Every landlord should have a copy of their state's landlord/tenant handbook. You can find it online; just search on "landlord/tenant handbook" and your state. You should also know how to file an eviction or have an attorney on your Power Team who can handle it for you.

Rich Guides answer questions from students about real estate investing and give them support and guidance as they develop their investing skills and knowledge. Rich Guides are available to take your calls at 800-978-8068, option 3, from 8:30 a.m. to 9:00 p.m. Monday through Thursday; 8:30 a.m. to 7:00 p.m. Friday; 10:00 a.m. to 1:00 p.m. Saturday (all times Eastern).

Posted 11:15 AM | Permalink | Comments (1) | TrackBacks (0)

By Kim Kiyosaki

Years ago I attended a seminar and the speaker on stage, a man, said to the audience, "I bet I can tell you the goal of every person in this room." I thought to myself, "How in the world would he know what each of our goals are?"

Then he stated, "Everyone in this room has one primary goal: to be happy."

I had to agree, my number one goal was to be happy—but it's the definition of happy that will be different for each person.

Years ago I attended a seminar and the speaker on stage, a man, said to the audience, "I bet I can tell you the goal of every person in this room." I thought to myself, "How in the world would he know what each of our goals are?"

Then he stated, "Everyone in this room has one primary goal: to be happy."

I had to agree, my number one goal was to be happy—but it's the definition of happy that will be different for each person.

So I asked myself, 'What does it mean to me to be happy?' I went through a checklist: Have a successful business, be in a great marriage, have lots of money and all the good things that money brings, a wonderful network of friends and family, a cat, world travel, great health, a sense of purpose in life, and on and on and on. I wanted all that…and then I'd be happy.

So I began to work towards all those things. In 1994 Robert and I "retired." We were not rich by most people's definition; we simply had more money coming in every month from our investments (primarily real estate) than was going out each month in living expenses. In other words we no longer had to work for money. We were free!

And after a few months of retirement and vacation we had to face the harsh reality that we were bored. Bored to tears. One morning we were sitting outside with a cup of coffee and we looked at each other and asked, "Now what?" We had all of the things on my checklist, so did that mean that we were done? Now Robert and I were supposed to be happy for the rest of our lives? Is that the formula? Obviously it wasn't.

Everything we had, and have today, brings us contentment and a sense of satisfaction, but I discovered early on that happiness, to me, is not an end goal. You don't wake up one morning and say, "Aha! I've made it! I'm happy! And I will be happy from here on." It's no different then working out at the gym. I would love to get to the point where I can say, "I've reached my workout goal! I am in shape. Hooray! I've made it–and I don't have to work out any more." That's not how it works.

What is happiness?

So what the heck is happiness? For me, happiness is something that is available to every person today. I know I'm happiest and most elated when I'm growing as an individual. When I'm learning something new and applying it. When I'm taking on something I not sure I can do–and I do it. That, to me, is individual happiness. I'm learning. I'm growing. I'm better today than I was yesterday.

As I see it, you have the choice of two directions: You are either growing or you are declining. A person does not stand still. You are either getting better–improving your health, your wealth, your relationships, etc.–or you're getting worse. Nothing stays static.

So what I know is this: I want to be happy. Happiness is an on-going process, just as building a business is a process or investing is a process. These are actually two of my outlets for happiness. In my business and with my investments is where I get to experiment. I test strategies, make mistakes and learn from them. The more I learn and grow, the more success I have. And the more I learn and grow the happier I am. So from this point of view, success and happiness go hand in hand. It's not the success that makes me happy, it's what I learn getting to the success that brings me happiness.

The key to success and happiness

How many books, articles and talk shows communicate the endless keys to success? Hundreds? Thousands? Maybe more. I only want to share one with you. This comes from my personal experience. It is the one key that I truly feel is most important for anyone seeking any level of success and happiness in her (or his) life.

The key is very simply this: Surround yourself with supportive people.

Said another way… Get rid of the negative people in your life.

Supportive people are those who encourage you to go for your goals and dreams. People who want you to win… and tell you why you will succeed and offer their guidance and support.

Negative people (and we all know who they are!) are the ones who will tell you all the reasons why you can't do something. They'll tell you, "It'll never work." "Don't be ridiculous!" "What makes you think you could pull that off?" "Don't take a risk, you might lose."

Negative people pull you down and usually result in unhealthy relationships. Supportive and positive people build you up.

I made the decision years ago to get rid of the negative people in my life. The price was too high and it was too tough to be polite and keep them around me. Negative people kill creativity. They squash your dreams. They keep you doubting yourself. They drain your energy and waste your time. Negative people keep you small.

I seldom give advice, but I will adamantly state here that if you have negative, even toxic, people in your personal or professional life, walk away from them. It's not always an easy thing to do. It wasn't for me. But realizing and enjoying that fact that these people no longer have any influence on me, I wish I had made the decision many years earlier.

See for yourself

Here a quick exercise: Write down the six people who you spend the most time with.

These may be friends, co-workers, or family members. The six people you hang out with most. Once you've got their names on paper, look at each one and ask yourself, "Do I feel supported and encouraged by this person, or do I feel resentment, jealousy and negativity from them?" You'll know instantly.

Stretching yourself and going for your goals and your dreams is tough enough without negative, limiting baggage. Your success will be much grander (and easier–and more fun) when the people surrounding you are on your side. In the book, TRUMP–The Best Real Estate Advice I Ever Received , many experts share their top gem of experience. Lester Crown, chairman of Henry Crown and Company, an investment firm, said it this way, "You can't make a good deal with a bad partner." I read two points into that statement.

1) No matter how good the deal–be it business, investing or personal–if you have a partner who is unsupportive, negative or with his or her own agenda, the good deal will become a bad deal. Period.

2) In order to attract a good partner, you have to be a good partner. So don't just look at those around you, look at yourself as well. And ask yourself, what kind of a partner am I? What kind of a partner do I want to be?

The most important action I took towards my own increased success and happiness was cleanly severing ties with the negative and pessimistic people in my business and personal life. And, in doing so, I began regularly checking in on myself and asking, "Am I the kind of person and partner that I want surrounding me in my life?" That one step changed everything in my life for the better.

Investor, entrepreneur and author of Rich Woman, Kim Kiyosaki educates women about money and investing through books, speaking engagements, a PBS TV show and RichWoman.com. Kim and her husband Robert created the CASHFLOW® board games and own The Rich Dad Company.

©2007 The Rich Dad Company, used with permission

Posted 11:06 AM | Permalink | Comments (1) | TrackBacks (0)

By Tyler Craig

The covered-call strategy provides an efficient way to make money in a neutral-to-mildly bullish environment. The two critical advantages to this strategy are its ability to produce monthly income and provide some downside protection. However, two of the biggest drawbacks to a covered call are that it is a more capital-intensive trade, and it does not have as high of a return on investment (ROI) in comparison to other option strategies. Before a trader can write a covered call, he must first buy 100 shares of stock and, as you can imagine, this can get quite expensive. Some of the students I have taught shy away from this strategy for that reason. Fortunately, there is an alternative-option strategy, which not only has a greater ROI, but is also a lot cheaper.

Let me introduce you to the LEAPS covered write.

LEAPS Defined:

To preface our conversation of LEAPS covered writes, let us review the basic definition of LEAPS. LEAPS stands for Long-term Equity Antici Pation Securities. Investopedia defines LEAPS as follows: "Publicly traded options contracts with expiration dates that are longer than one year." It may be important to note there are some discrepancies as far as how much time is needed in an option for it to be considered a LEAPS. Other sources consider options with longer than six to eight months LEAPS options. For the sake of our conversation, we will consider any option with around eight months or more until expiration a LEAPS option. There is no structural difference between a LEAPS option and a short-term option other than the amount of time until expiration. Remember, options are a decaying asset; thus they lose value as time passes (an effect known as time decay). The effects of time decay increase as options approach expiration. Therefore, due to the amount of time one is buying, LEAPS options experience less time decay.

Structure:

The basic structure to the LEAPS covered write is to buy a LEAPS call option and simultaneously sell a short-term (two to six weeks) call option against it. The only major difference in the structure of a LEAPS covered write and a covered call is that instead of buying 100 shares of the stock, we buy a LEAPS call option. Similar to a covered call, we can sell short-term call options against our LEAPS option, generating monthly income.

Strike Price Bought:

In order to keep the risk/reward characteristics of a LEAPS covered write similar to a covered call, it is important to buy a deep in-the-money LEAPS. Buying a LEAPS with a delta greater than .80 should suffice.

Strike Price Sold:

In a traditional covered call, we would sell one strike out-of-the-money. Use the same approach with the LEAPS covered write. One other way to approach this decision is to sell the strike price at which you think the stock will reside at on the expiration date of the short-call option. For example, if I was really bullish, I may consider selling two strikes out-of-the-money. Just make sure you are bringing in enough premium on the out-of-the-money option to make it worthwhile.

Finding the Right Stock:

We use somewhat of the same approach finding a stock for a LEAPS covered write as we would for a covered call. Both strategies profit from a neutral-to-bullish move in the stock. Therefore, look for stocks moving sideways or in mildly bullish up trends. We would also want a stock exhibiting lower volatility. For example, a stock that has made wild up-and-down swings over the last few months may not be the best candidate. Anytime we are looking to do a longer-term trade, such as the LEAPS covered write, it makes sense to use fundamental analysis to assess the strength of the company to make sure we are comfortable holding it. This would include making sure the company has had good earnings growth in the past and high-growth potential for the future.

Other potential candidates for LEAPS covered writes include exchange traded funds (ETFs). These investment vehicles give us the ability to trade the major indexes and sectors, such as the S&P 500 (SPY), Dow Jones Industrial Average (DIA), and NASDAQ 100 (QQQQ). These are great trading vehicles offering very good liquidity and tight Bid/Ask spreads.

Comparison of a covered call vs. LEAPS Covered Write:

Let's assume stock XYZ is trading at $186 and the current date is June 2.

XYZ Covered Call

Buy 100 shares for $186 and sell a Jun 190 Call for $5.40
Max Reward = $940
Max Risk = $18,060
ROI = 5.2% ($9.40/$180.60)

XYZ LEAPS Covered Write

Buy (1) Jan 2009 140 LEAPS call for $55.90 (9 months to expiration and delta = 86)
Sell (1) Jun 2008 190 call for $5.40 (3 weeks to expiration and delta = 44)
Max Reward = $700
Max Risk = $5,050
ROI = 13.8% ($700/$5050)

In a side-by-side comparison it is easy to see how the LEAPS covered write provides a MUCH cheaper alternative to the covered call ($5,050 vs. $18,060). In addition, we also generate a higher ROI (13.8% vs. 5.2%).

Avoiding Assignment:

By selling a call option, we are obligating ourselves to sell the stock if it rises past the strike price of the short call. Anytime we are short on options, there is always the risk of being assigned. However, that risk dramatically increases as the short option gets deeper in-the-money and as we get closer to expiration. In a covered call, being assigned is not necessarily an issue because we own the stock and are able to sell it if we receive assignment. However, in a LEAPS covered write, we do not own the stock; therefore, it is wise to avoid assignment by buying back any short in-the-money options prior to expiration. If the short option is out-of-the-money at expiration, we simply let it expire worthless and then reassess the stock and determine whether or not we want to short the next month's option to continue the trade.

We could continue selling short-term options against our LEAPS option month-to-month. However, at some point, we will begin to run out of time on our LEAPS option. As the LEAPS option approaches expiration, we will also begin to experience more time decay. To avoid this increase in time decay, it is wise to exit our long LEAPS position around two to three months prior to expiration.

For those of you seeking a more comprehensive overview of this powerful strategy, the LEAPS covered write is taught in depth in our Advanced Covered Calls class.

Tyler Craig is a stock coach for Wealth Intelligence Academy®.

Posted 11:02 AM | Permalink | Comments (5) | TrackBacks (0)

By Jacquelyn Lynn

How dangerous is the internet? You might as well ask: How dangerous is your neighborhood? As in the real world, your risks increase and decrease based on the type of online communities you frequent. And also as in the real world, you never know when a criminal is going to strike—because crimes occur even in the best of neighborhoods.

Simply having a computer and an e-mail account makes you potentially vulnerable to internet crime. Your best defense is knowledge and common sense: Know what type of schemes internet criminals are trying to pull off and remember that any deal that sounds too good to be true usually is.

Internet crimes tend to be financial and thieves play on two key emotions: fear and greed. The perpetrator may deliver a threat of some sort—your bank account is going to be frozen, the IRS is going to audit you, or your personal information will be compromised in some way—in order to gain access to your financial accounts for theft and/or your identity information for additional ID theft-related fraud. Or the perpetrator could offer you a quick and easy way to make some money, often by doing something that sounds innocent but will usually end up costing you far more than you thought you would make.

Con artists—named for their ability to gain the confidence of their victims—are often skilled at persuading people to participate in their scams, and they have the same access to the internet as anyone else. Some online scammers will spend months getting to know and building trust with their targets in chat rooms, on dating sites, and in other online venues before putting their scheme into action.

Let's take a look at some of the current internet crime schemes as identified by the Internet Crime Complaint Center:

Auction Fraud

Auction fraud typically involves the misrepresentation or non-delivery of a product advertised for sale through an online auction site. In one common auction fraud, the seller posts the item as if he resides in the United States, then responds to the "winner" (buyer) with an e-mail stating that he is out of the country for some reason and requests that payment be wired directly to him via Western Union, MoneyGram, or bank-to-bank wire transfer. Using those sources makes the money virtually unrecoverable and leaves the victim with no recourse. For more details on auction fraud and how to avoid it, visit www.eBay.com and www.paypal.com.

Counterfeit Cashier's Check

This scam targets individuals who use internet classified ads to sell merchandise or vehicles as well as landlords who advertise their rental properties online. Typically, an interested party outside the United States contacts the advertiser and agrees to make the purchase or rent the property. To make the payment, the "buyer" explains that someone owes him money and he will have that individual send a cashier's check in the amount owed to the seller. The amount of the cashier's check will be significantly more than the purchase and the seller is asked to deposit the check and wire the excess funds to the buyer or an associate of the buyer.

Most banks will release the funds on a cashier's check immediately or within a day or two. Many consumers believe this means the check is valid, but it can take up to several weeks for a bank to determine that a cashier's check is counterfeit. When that happens, the bank will hold the person who deposited the check responsible for the full amount of the check. A victim of this scam has lost the merchandise sold, the amount of money he wired to the “buyer,” and probably bank fees for the returned check.

Employment/Business Opportunities

A common scam in this category is when bogus foreign-based companies recruit U.S. residents on employment-search websites for work-at-home employment opportunities. These positions often involve reselling or reshipping merchandise to destinations outside the U.S.

Prospective employees are required to provide personal information as well as copies of their identification, such as a driver's license, birth certificate, or Social Security card (which puts them at risk of being victims of identity theft). The employees that are "hired" by the bogus company are told that their salary will be paid by a U.S. company that is a creditor of their new employer because the employer does not have any banking set up in the U.S.

When the employee is paid, the amount of the check is significantly more than what is due. The employee is told to deposit the check and wire the excess payment to the employer's bank overseas. When the check is later found to be fraudulent, the victim is in the same situation as victims of counterfeit cashier's checks.

Escrow Services Fraud

Legitimate escrow services play an important role in protecting buyer and sellers in online transactions. However, scammers have been known to create phony escrow sites to which buyer victims send money and receive nothing in return or from which sellers wait for payment after shipping merchandise—payment that never comes. If you use an escrow service, be sure it's one you know and that you can verify its legitimacy.

Internet Extortion

Internet extortion involves such activities as hacking into and controlling various industry databases, promising to release control back to the company in exchange for money. The perpetrator may threaten to compromise the information in the database unless a payment is made.

Investment Fraud

Investment fraud is an offer using false or fraudulent claims to solicit investments or loans, or providing for the purchase, use, or trade of forged or counterfeit securities.

Lottery Fraud

A common lottery scheme involves sending an e-mail advising the recipient that he has won a lottery and provides instructions on how to collect the winnings. Typically the "winner" is asked to pay an initial fee ranging from $1,000 to $5,000 and often requests for additional payments follow, but the "winner" never receives the promised jackpot.

Nigerian Letter

This common scam involves an e-mail from individuals representing themselves as Nigerian or other foreign government officials, or as victims of foreign government political situations. They offer the recipient the "opportunity" to share in a percentage of millions of dollars in exchange for assistance in placing large sums of money in overseas bank accounts. The letters go into great detail about the situation, which may include the death of a loved one, political persecution, or other sympathy-grabbing story. The recipient is solicited for money to pay taxes, bribes, and legal fees, as well as for personal information, such as bank name and account numbers. The scammer promises to reimburse the victim for the expenses as soon as the funds are out of his or her country. Of course, the money is never repaid and the victim is also at risk of additional theft by having provided bank account information.

Phishing/Spoofing

Spoofing generally refers to e-mail which is forged to appear as though it was sent by someone other than the actual source. Phishing, often utilized in conjunction with a spoofed e-mail, is sending an e-mail that falsely claims to be an established legitimate business or government agency in an attempt to dupe an unsuspecting recipient into divulging personal, sensitive information such as passwords, credit card numbers, and bank account information. Phishing e-mails typically direct the user to a fake website set up for fraudulent purposes.

Reshipping

The reshipping scheme requires individuals in the United States, who sometimes are coconspirators and other times are unwitting accomplices, to receive packages at their residence and repackage the merchandise for shipment, usually abroad. Typically this merchandise was purchased with fraudulent credit cards and the scam unravels when the defrauded merchants begin to contact the reshipper.

Reshippers are often recruited through employment offers and in online chat rooms. As part of the employment application process, the victim is required to divulge personal information such as Social Security number and date of birth, which is then used to obtain credit in the victim's name.

Third Party Receiver of Funds

In a work-at-home scheme, a scammer in a foreign country solicits assistance from U.S. citizens. The scammer claims to be posting internet auctions but can't receive the payments from the auctions directly due to being outside the U.S. and recruits the victim to act as a third party receiver of funds—funds that come from still other victims who think they are making a legitimate online purchase but who never receive their merchandise. The third party receiver of funds receives the money and wires it to the scammer. The scam typically comes to light when the victims complain about not receiving their merchandise.

Many online scams are obvious, but there are plenty of very sophisticated and creative criminals working on the internet. Your best strategy is to be suspicious—remember, it's not paranoia if they're really out to get you. Insist on verifying the legitimacy of every online transaction with an unfamiliar entity and never give out personal information unless you initiated the contact and are certain of the authenticity of the site or individual you're dealing with.

Click here for Internet Crime Prevention Tips.

Jacquelyn Lynn (www.jacquelynlynn.com) is a business writer, speaker, and author of The Entrepreneur's Almanac.

Posted 10:57 AM | Permalink | Comments (2) | TrackBacks (0)

By Mark Gilliland

It is no secret that if you have two similar homes, the one that looks nicer typically sells or rents faster. A few smart color choices can make your rehab stand out in a positive way with little or no additional cost.

Color is a powerful tool and very useful in attracting people to a property. Consider that small details have a huge impact on our subconscious appreciation for any work of art. Your rehab is your canvas. Before you begin painting, consider all of the colors you intend to use and how they will work together to create a masterpiece both inside and out.

On the outside

First, let's consider the psychology of color as it applies to the exterior of a home. Color choices send out signals to prospective buyers and renters, which is why we need to pay attention to color when we are remodeling, installing a sidewalk, or putting on a roof. If, for example, you replace a sidewalk, consider not only the design and function, but how the color will affect the property as a whole.

Color can affect our mood. For instance, yellow is a color of joy and happiness, but it is also the color of caution and deceit. The sight of yellow flowers sends our subconscious a message that we need to be cautious. With this in mind, avoid using yellow flowers and decorations on the exterior of the home where people get their first impression of the property. This phenomenon seems to prevail most in small quantities, which researchers think is related to a yellow traffic light, whereas a house painted entirely in yellow does not necessarily have negative connotations.

If the exterior of the house is undergoing improvements and will be painted or have new siding installed, it doesn't cost any more to choose colors that complement rather than clash. It is the details that make the difference. If you're replacing a roof, you'll probably be replacing the gutters as well. Gutters are made in approximately 24 different colors that are standard; you can choose from those standard colors without increasing the cost of the project.

There are also the shutters and the front door to consider. Careful selections can set a house off and make it shine without additional costs. If you are not planning to replace the front door, a paint job is inexpensive and will make a huge difference. The last main exterior component is landscaping. Since an entire article (or book) could be devoted to this topic, it will suffice to say that you must consider the landscaping when choosing your colors. Your plant materials should have colors that work with the rest of the home.

On the inside

Now let's turn our attention to the interior. Many so-called real estate experts advise neutral colors throughout inside. While this is fine to a certain extent—you want potential buyers to be able to see their own belongings fitting in the rooms without clashing—too much neutrality can leave a prospective buyer or renter rushing to escape a drab-looking house. Use neutral colors for most of the interior, but add color or texture for some visual interest. You don't want prospective buyers or renters to be bored by the time they've seen the third or fourth bedroom and find that it looks exactly the same as the first.

Some affordable techniques to create a break in the neutrality without being jarring include installing inexpensive window coverings, painting trim and baseboards different colors, or installing colored carpet.

You want the bathrooms and kitchens to stand out and make a positive impression as well. Permanent fixtures (sinks, tubs, shower stalls, commodes) should be a neutral color. Accent with mirror frames, window treatments, or other decorations. As long as you do not choose a fad color that will date your rooms, you can put some color in your countertops. The family room carpet and a few select walls can also make some color statements, if the color is chosen carefully. An accent wall is easy to change and can potentially affect the entire flavor of the house.

If interior decorating is not your thing, don't worry. Paint specialty stores and home supply stores hire recent interior design graduates who will help you free of charge; all you have to do is ask. These stores typically have photo samples and even computer programs that allow you to plug in different colors to see how they go together. Just remember the power and affordability of color as a tool to sell and rent your properties.

Mark Gilliland is a real estate mentor for Wealth Intelligence Academy® and has a B.A. in Interior Design from KSU.

Posted 10:45 AM | Permalink | Comments (1) | TrackBacks (0)