Making money in the stock market isn’t always easy. Here is a simple technique that I use to increase my chances. The volatility index “VIX” is a measure of how nervous investors are. The VIX moves in opposite directions from the stock market for the most part.
In the 5 year graph below we compare the VIX (blue) and the stock market index (red.) See how they usually trend in opposite directions?
In the past the VIX rarely goes higher than the 40 point mark. And when it does, it’s usually short lived. Today VIX jumped to 41.35, and the stock market dropped to 1129.56. I consider this to be a buying opportunity. My technique for swing trading is to buy increasingly more stocks as the VIX grows past the 40 mark, and sell when it drops back below 30.
So today, 09/22/11, I bought 60 shares of SNC Lavalin (SNC.TO) at $42.42. and 75 shares of Halliburton Co (HAL.N) at $33.10.
Total bought = $5024.70
All this money is borrowed from my bank at 5% interest rate. I’m using leverage because I don’t have any spare cash right now.
My exit strategy? I will sell both stocks when either the VIX drops to 30, or I can make a $1000 profit by selling both. If you’re not comfortable choosing your own stocks, just buy an ETF that tracks the index like (VTI.N) for example, the principle is the same.
I will follow up this post with another entry when I sell my holdings, hopefully soon. Or in the unlikely chance the VIX moves even higher to 50, I will be buying more stocks.
“How much income do teachers make?”
“He’s a book keeper? I wonder if his income can support his family.”
Sometimes we assume a person’s income level based on their line of work. But this mindset is dangerous and can limit our earnings potential. Because if we accept the idea that our jobs dictate our incomes, then our motivation to earn more income will be constrained by the limitations of our jobs. However, a job salary is just a piece of the income pie. So instead of getting stuck thinking about how to get a promotion, let’s focus on the bigger picture. How to increase our income, period. Which of course will include how to get that promotion.
Income can appear in many different ways. We can invest and slowly turn our savings into investment income. Or get a part-time job. Income can also come from rent. If we had any technical skills, (writing, drawing, speaking) we could do freelancing. Or find online micro jobs from sites such as AmazonMechanicalTurk or MicroWorkers to make a few extra bucks. Even recycling plastic bottles can be a small but stable source of income if we so choose.
So let’s avoid the income/career trap and think outside the box. Think about how we can increase our income from any source possible, rather than just how to increase our income as employeesヽ(´ー｀)ﾉ
Our household net worth for the country is about $6.4 Trillion. On a per capita basis, the average person living in Canada has a net worth of $184,300. I am surprised at how low this number is but I think as the population ages, we should see this figure grow. If not, then we are in deep trouble.
What might be worrying now is seeing household debt continue to grow as a result of both higher mortgages and more consumer borrowing (this, I am guilty of.) I still have a long way to go before my net worth reaches the national average but I wonder how much of that number is over inflated due to the prolonged environment of low interest rates.
A big chunk of Canadians’ net worths are in our homes. Our housing prices are 7% higher year over year, but our GDP growth hasn’t even come close to that. If rates continue to stay this low I wouldn’t be surprised if real estate prices grow by another 7% by this time next year. In any case it would certainly be nice to have at least a million dollars in investable assets before I retire.