Warren Buffett is perhaps the greatest investor of all time.
His company, Berkshire Hathaway, has one of the best-performing stocks in the history of the world.
Berkshire shares have returned more than 2,000,000% since the company went public in 1964. That’s enough to turn every $1 invested into $20,000.
If you’ve read books or articles on Buffett, then you know the conventional wisdom is that Buffett makes his fortune by buying great companies trading at great prices… and then holding them for years. A strategy called value investing.
That’s one of my favorite strategies plus it’s a safe and proven way to build real, sustainable wealth.
I’ll be doing a three part masterclass series on how to select individual stocks in August with a seasoned stock picking investor who I know you’ll love.
But that’s not what I want to talk about now.
What I want to talk about is that, what a lot of people don’t know, is that Buffett didn’t make billions just through value investing. He used alternate strategies to generate immediate income while his long-term investments selections came to fruition.
He used this strategy in 1993 to make $7.5 million in upfront cash in one day.
And Berkshire Hathaway’s 2008 annual report showed Buffett used it again to collect over $4.9 billion in premium payments.
Regular investors often misunderstand this strategy… But it’s potentially very profitable.
In the Wealth Builder Masterclass I did I shared what this strategy is and, more importantly, how to use it to generate immediate income.
Most people don’t use these strategies.
They think they’re too tricky.
Or that they are slightly more complicated.
But if you can handle buying your trackers online, you can do this.
It’s All About Selling Market Insurance
To truly build long-lasting wealth, you need to generate multiple reliable streams of capital growth AND income.
That’s what Buffett did by sometimes selling put options.
A put option gives the buyer the option to sell the stock at a certain price on a certain date. Think of buying a put as the same as buying disaster insurance.
When you sell a put, you are selling this insurance (and selling insurance is one of the most profitable businesses in the world).
As savvy Wealth builders we don’t want to insure just any old company, we only sell puts on the highest quality companies.
Johnson & Johnson is one of my core shares in my stock picking portfolio. Today, JNJ trades at $167 per share.
My core stocks are shares in companies with stable earnings and cash flows. They’re great stocks to insure. However, like any company, core shares will have price drops.
The cause could be some temporary bad news… or regulatory problems… or just a downturn in the overall market.
No matter, they’re still great companies you want to own, even more so if you can get them at a cheaper price.
But here’s the thing…
You can generate immediate income from core shares like JNJ while you wait for their prices to come down to levels you’re comfortable to buy them at – pretty cool.
Buffett used this same strategy in April 1993 when he sold puts on Coca-Cola (KO). At the time, KO traded at $39. Buffett thought a fair price would be $35.
KO eventually dropped to $35… and Buffett “put” the stock. So he received $7.5 million upfront to buy a stock he already loved anyway.
Today, KO shares trade around $46. So not only did Buffett receive a premium to buy the stock, he also profited from the price appreciation.
(He did the same thing with Burlington Northern Santa Fe in 2008, generating $4.9 billion in premiums over the life of that trade.)
Starting Your Own Insurance Operation
Many investors consider options to be risky. And the way most people use them can be incredibly risky.
But as I showed you above, options can be a safe, conservative strategy to make extra money in the markets.
Now, I understand that options may be new to you which is why I held a very comprehensive training on what they are and how to use them and you can get your hands on the masterclass now.
Keep learning and expanding your wealth building capacity and competence. This is how you make your freedom inevitable.