You may know him as a Rich Dad Advisor or bestselling author, but Cash Flow Diary podcast guest Andy Tanner is so much more. He earns cashflow through trading paper assets, which he walks us through in this educational interview. In fact, he really simplifies things so we can all understand the process better. Before being all he is today as a stock market superhero, Andy was just a college kid attending university on scholarship playing basketball. After college he ended up being a public speaker because he had a good stage presence and proved his value as a pretty super sales guy. Then he was introduced to something different. It was a software that helps people learn about investing in the stock market. Andy didn’t know it at the time, but his path had just found him. Because he loved learning about new technologies and didn’t know much about using the Internet in sales… much less the stock market… he had to do a whole lot of research so he could sell the concept of the software. Because he loves teaching others, he was very successful in this endeavor. Andy says that there is no better way to learn than to teach, so that’s what he did. He eventually went on to start a few businesses on his own. He says that he failed a few times but just kept swinging until he found the right fit and a business he could succeed in. He says that his amazing drive comes from the desire for more freedom and flexibility in his life, and to spend as much time as he can with his family. Learn how Andy Tanner achieves cashflow and plenty of it in his life today. You’ll learn a lot about trading paper assets, which is something you might just want to check out for yourself. If you’re looking for a good mentor in this area, be sure to visit Andy’s website. Learn more. LISTEN NOW
On this episode of Cash Flow Diary, J interviews Andy Tanner who is one of the Rich Dad advisors and author of 401 (k)aos, and Stock Market Cash Flow. If you want to know more about generating cash flow using paper assets, then you need to listen to this podcast!
03:31 Andy’s origin story
09:26 Summoning courage
13:23 Starting with paper assets
16:20 Ease of access
22:02 Practice on paper
25:53 Apply for a free one-on-one breakthrough session / J’s episode insight
27:30 Generate cash flow using paper assets
32:19 What would Warren Buffett do?
36:28 The wise investor
38:02 Economic risks
41:40 Protecting yourself against risk
44:27 Three attitudes of risk
47:08 Evaluating stocks and equities
53:02 Newbies getting started
59:03 Contacting Andy
Main Questions Asked:
- What is your origin story?
- What was the point at which you summoned the courage to become an entrepreneur?
- What is the first thing that someone needs to think about when getting started with stocks?
- Does the ease of access into the stock market have a lot to do with the reason people have had a negative experience?
- Help us understand ‘trading.’
- How does one generate cash flow using paper assets or stock?
- What are important economic risks we need to be concerned about, and how can we mitigate them?
- When evaluating stocks or equities, what are some of the fundamentals you use to determine stock price?
- How do you suggest a ‘raw newbie’ get started in buying stocks?
- What are you studying and trying to learn right now?
Key Lessons Learned:
- Often we find our destiny on the road trying to avoid it.
- One of the greatest ways to learn something is to teach.
- If you want to learn something, don’t read a book on it, write one!
- We are all offered reasons to quit and excuses why things won’t work. However, continuing is a conscious choice.
- Sometimes failure comes because we start doing things before we start learning about it. Remember to fail forward, fail fast, and fail frequently.
- The philosophies between paper, business, and real estate investing are often the same.
- Investing is a life skill and something to learn rather than something to hire out.
- Until a person has successfully traded virtually, is able to handle losses, and market adjustments, then it’s probably not time to do it for real.
- Practice on paper to get your education, then when you ‘jump in,’ start small and scale. This is a gradual process.
- Every time we make a transaction there is something that has been exchanged. Essentially, a trade is when something is exchanged.
- There is really no reason to choose just one investment type. It is safer to have multiple streams of income.
- If you want to be an entrepreneur or investor, you need to know why you are doing it.
Generate Cash Flow Using Paper Assets
- A paper asset is a claim, much like a deed or gold certificate, saying you own a part of the company.
- People who get in trouble with paper assets usually have no hedge or exit strategy.
- Dividend – E.g.: Owning Verizon stock that fluctuates, but earning a consistent quarterly return.
- This money doesn’t come from a move in the stock but rather the movement of time (regardless of the fluctuation).
- Derivatives – This is a contract. E.g.: If you own a house and have a rental contract, then that is a derivative that expires.
- Derivatives in the paper asset world are often called futures or options.
- Andy often sells his for ‘time decay,’ and makes money because he is selling someone an option with an expiration date.
Economic Risks and How to Mitigate
- There are many different types of risks including interest rates, geographic, and legislative. There are two broad ideas of risk:
1) Systemic – E.g.: When the entire real estate market collapses due to a subprime melt down, or the stock market collapses due of the dot com bubble.
- There is a long-term fiscal risk in the USA, and monetary policy is being used to make up for that.
2) Non-systemic – E.g.: BP breaks a pipe in the gulf and stock prices fall from $60 to $30 in a month.
- To protect yourself against paper asset risk, you should buy insurance (as you would with a rental contract).
- Just because there is a risk doesn’t mean it’s a reason to not move forward.
Three Attitudes of Risk
1) Risk Taker – This is the worst thing you can be. These are the people who think they can never get beat.
2) Risk Avoider – A person who is too scared to try anything.
3) Risk Manager – The best-case scenario. This is where all the money is made.
- Remember if there is no risk there is no reward.
Evaluating Stocks and Equities
- Four pillars of investing:
1) Fundamental Analysis – Gathering information about the strength of the entity.
- Look at the price earnings ratio and growth.
- Essentially, this is reading a financial statement and figuring out if they are earning or losing money.
- What is the debt to equity ratio?
2) Technicals – Looking at trends.
- This is the technical analysis of supply and demand.
3) Cash Flow – Take a Position and decide what you will do with the information.
4) Risk Management – How will you deal with changes?
- Always do your ‘just in case’ preparation.
- When you go into a trade, make sure you know how you’ll get out of it before you commit.
- Always know your maximum exposure.
Advice to Newbie Get Started
- Always learn before you earn.
- Your first trades won’t be to make money, but will be about learning.
- Separate education from advice.
- If you have disposable income, there are things you can do to scale in.
- E.g. Apple stock is $114.48, however, options are $7. You could spend $700 to control $10K of stock.
Thank you for listening! If you enjoyed this podcast, please subscribe to the show in iTunes
Links to Resources Mentioned
401 (k)aos (book)
Stock Market Cash Flow (book)
Eleven Rings (book)
Learn Investing Now Cash Flow Quadrant
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