Producing a Rarity

 

by Van K. Tharp, Ph.D.

 

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Producing a Rarity

Trade Your Way to Financial FreedonAfter studying successful traders for many years, I became intrigued by the fact that so many didn’t consider themselves wealthy. Typically, they said they’d consider themselves wealthy if they had ten times as much as they currently had—even if that was already a very large number. This really made me curious about the concept of wealth, so I started modeling it.

 

Over the course of that wealth-modeling process, I learned that what people think about wealth and what wealth actually means are two very different things. What's more, I discovered a whole new paradigm for “winning” the money game. It’s a different game than the one the old models used. The old models say that to create wealth, you must work hard, try to make as much money as you can and accumulate lots of assets.

 

But this new model was radically different. How different? When I taught these concepts at workshops, numerous attendees found out that with a few quick adjustments, they could “retire” immediately. Can you imagine doing that yourself? Chances are good that you’re probably a lot closer to living well without working hard than you might have believed.

 

Eventually, I put all of my wealth modeling ideas together in my Safe Strategies book, which made the New York Times Best Seller list for business books. As groundbreaking and practical as the ideas in that book are, a lot of people still keep working hard and pursuing the old models. There’s a much easier way to get to the life you want. Safe Strategies can help you:

  • Determine your “magic” number
  • Earn substantial passive income
  • Get completely out of debt in just a few years
  • Maximize what you already have
  • Implement simple and effective investment/trading strategies that still work

As it turns out, Safe Strategies for Financial Freedom has now gone to print-on-demand status, which means that if you order it from Amazon, they have to order it from the publisher, McGraw-Hill, and the process will probably take three to six weeks before you get the book. That’s what print-on-demand really means. This is the only published book of mine that currently has this status. I’m surprised that it’s been given that status, because it made the best seller lists when it was initially released eight years ago.

 

Safe Strategies puts forth the idea of financial freedom, which is an incredibly important concept. Despite the fact that I use the term “financial freedom” in the title of several books, few traders really know what it means.

 

Financial freedom occurs when your monthly passive income (i.e., income that requires little or no work on your part to generate) exceeds your monthly expenses. You can figure out how far away you are from financial freedom by subtracting your monthly expenses from your monthly passive income. Let’s say that your monthly expenses are $5,000 per month. Let’s also say that you generate passive income of $1,200 per month from rents and $1,800 from dividends, for a total monthly passive income of $3,000. Your financial freedom number would be $2,000 per month.

 

If you keep that number—$2,000 per month—in mind, then you will probably find a way to reduce it to zero so that you are financially free. Although income from trading usually doesn’t qualify as a passive activity, I’m willing to consider it passive when it takes less than three hours per day to produce.

 

For example: Let’s say that you have $40,000 in a day trading account. You are willing to risk 1% of that, or $400, each day. Let’s also say that you trade the way Dr. Ken Long does, where you split your daily risk amount into four “bullets” to shoot on trades—each being one fourth of your daily risk limit, or $100. Further, you have a trading system with an expectancy of 0.3R, and you only need to trade the first two hours of each day to use your four bullets. This means that with four bullets, you would make 1.2R each day on average, or $120. Trading 20 days each month, you would make a total of 24R, or $2,400. In other words, you would be financially free. In fact, you could theoretically meet your $2,000 number and also put $400 each month toward growing your account. Remember too that you wouldn’t have to pay garbage taxes (i.e., social security and Medicare) on your trading income. Do you think you can do that? I believe that most people can do that - provided they get rid of the psychological junk clogging their minds.

 

It can be even better than that, though. Let’s say you’re willing to risk 1% of your account value each day, and that you change the dollar amount risked at the end of each month. For the first month, you’d risk $400 per day/$100 per bullet. At the end of month one, you’d take out $2,000 to help cover your living expenses and put the other $400 into your account, which would leave you with an account balance of $40,400. Your 1% daily risk amount would now be $404, and your bullet would be $101. At the end of the second month, you’d be up $2,424, which means you’d put an extra $424 into the account. If you continued with this allocation, you’d be adding $759.32 to your account by the end of the first year; $1,527.90 at the end of the second; $3,074.44 at the end of the third; $6186.37 at the end of the fourth; and $12,448.19 at the end of the fifth. At the start of the sixth year, your account would be worth $240,803.

 

Financial freedom is the primary topic of Safe Strategies. Personally, I think the concepts in the book should be foundational reading for any trader (or anyone who wants financial freedom, for that matter). It includes:

  • Discovering your financial freedom number
  • Paying yourself first so that you can develop enough money to earn passive income
  • Getting out of debt in just a few years, because debt is a big portion of most people’s expenses
  • Maximizing what you already have
  • Understanding the value of the dollar (or your own currency) and what it means for your financial freedom
  • Fixing your mistakes
  • Using position sizing strategies to meet your objectives
  • Plus some great strategies that still work, including:
    • Chris Webers’ Max Yield Strategy, which requires a decision once each year
    • Benjamin Graham’s NCAV strategy, which worked great at the bottom of the bear markets in 2003 and 2009

As I said earlier, though, if you order the book from Amazon, it’s going to take as long as six weeks to arrive at your door. But we have another suggestion—one that could net you a real rarity. When we first published Safe Strategies for Financial Freedom, we were going to promote it in a unique way. We produced 1,000 numbered copies that all three authors signed—D.R. Barton, Steve Sjuggerud and me.

 

Around the turn of the decade, it was pretty easy to find the three of us together once or twice each year, but that just doesn’t happen anymore. I haven’t seen Steve Sjuggerud for about seven or eight years. D.R. Barton and I watched the Packers win the 2011 Super Bowl, but we don’t get together very often, either. It would be very difficult to get all three author signatures on the book now.

 

In any case, something happened and we never went through with the original promotion strategy for the limited edition signed copies. Consequently, we still have a number of them left, and we’d like to offer them, not only as books, but as an investment.

 

To make the limited edition more attractive than a copy that would take six weeks to arrive and that loses value, we’re going to offer the ones we have left and raise the price as the books sell out. We’ve sold around 400 of them already, so we have about 600 left, ranging from number 26 to 1,000. Now we’re doubling the price, and as we sell more and more of them, the price will continue to rise. Here is the pricing schedule:

 

Copies Price Remaining
1st 400 (sold) $24.95 600
Next 100 $49.95 500
Next 100 $74.95 400
Next 100 $99.95 300
Next 50 $149.95 250
Next 50 $199.95 200
Next 50 $249.95 150
Next 50 $349.95 100
Next 50 $495.95 50
Next 25 $795.95 25
Next 15 $995.95 10
Next 5 $1,500.00 5
Next 4 $2,500.00 4
Last 1 $5,000.00 0

 

Because we abandoned our original promotion idea, we didn't track, and consequently have no idea what happened to, copies 1 through 25, as well as fifteen others with edition numbers below 100. If you were lucky enough to get one of those, we will gladly buy it back for the current price of $49.95—provided it’s in new condition. As the books sell and the price goes up, our offer price for numbers less than 100 will also go up to match the current price. As we go along, we’ll sell the higher edition numbers first and work our way down.

 

I’ve noticed that many artists seem to follow this strategy, which helps their customers. Peter Lik does it with his limited edition photographs. New editions are limited to 995 numbered prints. The price starts out at about $2,500 per print, but by the time the edition is 99% sold, the last copies sell for as much as $300,000. In fact, one of Peter’s photographs actually sold for over a million dollars. Frederick Hart has also used this approach with his limited edition sculptures, along with many others.

 

Anyway, if you haven't looked at this incredible book, we recommend you do so now. Right now, we’re selling them for $49.95. After we sell 100 copies, the price will go up to $74.95, so take advantage of this offer as soon as you can.

 
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