Grow stocks versus buying stocks is the dividend. As you just heard. The stocks pay out dividends grow stocks normally don't. about one third of the gains in the s&p 500 over the last 510 1520 years, come from dividend payouts. Basically, if you buy the stock hold on to it and get those dividends over time, it can add up to about 30% of your overall profit. So when people do stock charts, they look at total return, including the dividend where if you look at stocks without total return, based only on price, usually it's 30% less so.

That is a major difference between value stocks and growth stocks. One of the things of couch potatoes, philosophy is to have a mixture of both because some ears grow stocks while form Other years value stocks outperform. So why not have both. And a good mix in your portfolio would be half and growth, half in value. And we'll get into this more in detail later. Now we're going to talk about options.

Options are very interesting. options is a great way to make a lot of money quickly. And also is a good way to lose a lot of money quickly. There are risks good options, the option risk is similar to stock in other words, you can put your money up and you can lose and you can lose it all. The one advantage and option has overstock is when you buy a stock, a stock can go to zero and you can you lose all that money you put into the stock or an option also can go to zero and you can lose the money in the option. The difference is if I put $500 In an option play, say on Microsoft, I could lose 500 bucks.

But if I purchase Microsoft stock, it may cost me $5,000 and I can lose it all. So options is very limited risk, it's a little out of money. inside of that is if the stock goes up, the option price goes up, usually quite a bit. And that's where you can make some serious money. If you sign up for an account through one of the discount brokers, you can sign up to do options. You can also do it through regular broker, you usually have to review some information and sign off the understand the risk of options, but options can generate quite a bit of money safely and we're going to talk about that.

Now. There's two types of options. There's calls and there's puts and slow confusing on both because you can buy or sell call you can buy or sell put all that means is as an option, it's the ability, the right to the buyer sell that stock at a certain price by a certain time doesn't mean you have to do it just means you have the right to do it. So for example, if I buy Microsoft, and instead of buying the stock, I buy a call Microsoft, I'm saying that this certain price by this certain time, I can purchase the stock all the way up to the date of expiration. The same applies to puts the purchase is the opposite side of the trade. I'm actually having somebody else put the stock to me at a certain price.

If I sell a put. If I buy a put, I'm saying I can give the stock at a certain price, by a certain time is somebody else at this fixed price. If I buy a call, I'm saying I'm going to buy the stock at this price. By this time, well, I can sell a call or somebody else is actually going to give me money to purchase the stock by a certain price by certain time. So you can buy or sell call, you can buy or sell puts. And by using this in the way we make money in stocks, you're going to find that this can greatly reduce your overall income, combination calls and puts.

And don't feel like it's overwhelming. Feel free to review this at any time. In fact, one of the nice sites to go to is investopedia where they go over very specific examples of calls and puts and how they work. And we're gonna get into that ourselves. One more thing If you own the stock, you can sell a call on it, that's called a cover call, because you're covering the call, which shows you your own stock, meaning that somebody else takes the stock away from you at a fixed price, you have the stock to handle. If you sell a put on the other hand, somebody is giving you money upfront to purchase the stock at a fixed price, and usually these are called naked puts.

Because you don't have a stock, they have the stock in it, putting it to you at a specific price. The other side of the coin is if I don't purchase the stock, but choose just to buy the call, and betting that the stocks gonna call up and I'm gonna make money by selling that call at some point down the road before expiration. And with puts if I do a married put means I own the stock and I can put it to somebody else at a fixed price by a certain date. And again, This is a way of making money usually calls and puts covered calls naked puts, is a way for you to generate income and reduce the price, the amount of money you put in the stocks, puts by themselves. If it's a married, put were married to a stock you own, you own some form of insurance, you're betting that if the market goes down, you can still put that stock at a fixed price to somebody else.

And of course, a covered call. When you own the stock, that also protects you as a form of insurance, it gets a declining market because you're collecting money up front. And if the other person does not purchase the stock at a fixed price, usually because the market goes down. You still can hang on to that income and the stock as well. And of course note that when you sell a call on a stock you own you still collect the dividends. Unlike Put where you collect cash up front.

But the person is not putting to use the stock. And if you don't own the stock, you don't get the dividend. So then mine, we're going to get into inflation risk. Inflation risk the stocks, yes, if there's high inflation stocks usually go down and lose money. So, inflation risk does hurt stocks over the long run. It also hurts bonds as well.

In fact, more so because bonds are very sensitive to inflation. If inflation suddenly spikes, bonds will lose money because investor can go out to the bond market and purchase a better bond at a higher percentage of principal pay back in relation to the existing bond that's for sale. Thereby, bonds are worth more than are put on the market versus As the ones that have been around for a while, so inflation risk hurt both stocks and bonds. crashing market, this does happen. As we all know, stock markets do tumble, they do go down. back for 2018.

I would expect by the end of the year, the market probably will go down. So crashing markets can hurt you. The way to deal with a crashing market is to have cash on the side so you can buy stocks at a reduced price. You can also buy hedges, for example puts that we talked about, they could put the stock at a fixed price. As stocks go down in the crashing market these puts are worth more and more and more their form of insurance. And that can help relieve you of a declining value in the stock market.

You can also buy mutual funds and ETFs exchange traded funds that are in Verse In other words, the market goes down, they go up in value. That's another way to protect in the crashing market. You can also soften the market by owning bonds. Bonds pay a fixed rate of interest as long as you don't sell the bond, yet get payments over time. And then when the bond matures, you get all your money back. Interesting enough, in the crashing market, bonds are usually worth more reversal the means crisis investing.

Reversal. The means means whenever it goes up, eventually goes down, whatever goes down eventually goes up. This is so true in the stock market. People forget that trees don't grow to the sky. In other words, growth stocks keep getting more and more expensive every year. Eventually, they're gonna crash just matter when they're going to revert to the mean.

When they revert to the mean value, stocks will all of a sudden become the stocks to own and these will go up in value as growth stocks divine, actually decline in value. So crisis investing is a very good method of investing overall. Some stories of crisis investing, for example, British Petroleum many years ago had a massive oil spill. It was covered in the news for about six months, it was on the front page of every magazine, covered on TV and in the media, their stock cratered in crash and became a buying opportunity. The moment the lawsuits were filed, investors knew what's going to cost to fix the problem. And at that point, British Petroleum started going up in value and the stock started to be more, more and more and more and more oftentimes, when you watch the media When you're talking about a particular company or stock, or a particular sector that's in crisis, it's worth investigating because if you invest in the crisis, usually over time, not only do you make your money back, but you make your money back at quite a profit.

Our favorite thing about crisis investing is magazine covers. Usually magazine covers that contrarian indicator, for example, I own Cisco at one time, when they put john chambers on the cover of, I believe it was a Business Week, saying this is the only stock to own well before so the mean came into effect basically, I bought the week before, and I watched that stock decline in value more than 50% over the next six months, because the stock became too popular to own everybody at it and everybody want to get rid of it. In other words, when the pool gets To crowded with people, there's nobody left to jump into the pool. And that's when stocks decline when there's too many people chasing the stock, and now they start dumping the stock. So if you get a magazine cover media coverage, where they said this is the only stock to own this is where you're gonna make all your money.

For example, currently Bitcoin definitely is that now the one is Amazon. Another one is Google, you know, these stocks will eventually tumble and when they tumble, they will tumble hard and go down. On the other hand, when it's crisis, and nobody wants to own it, when they say it's the death of equities that there's no way anybody's gonna make any money. This is the worst thing to own is usually a good sign investing. Point jump in was maximum pessimism. You also see this in sectors for example, Brazil or Mexico get into crisis or Greece.

Nobody wants to own anything there. And that's the best time to buy versus a country or a sector where they say this is the only thing known going forward and that's usually the time to sell. So this is known as crisis investing. My strategy on crisis investing is to look back the last year, usually at magazine covers because the behind the times the media coverage, and see what companies in trouble and see where they are now, and how much they can come back. So now we're going to get into actual strategies.