Minimalist Investor Maximum Profits

By John R. R Klinefelter

Minimalist Investor/Maximum Profits is a book that will help people with an unwavering interest in the moneymaking world of the stock market. It is easy to read and full of useful insights that you could grasp directly and should teach you the basic strategies to invest profitability. As the author boldly declares right in the preface, "In this book I explain how to evaluate stocks, how to select winners, when to buy, when to hold a stock, and when to sell . . ." This little volume showcases the

• Language: English
• Publisher: Page Publishing, Inc.
• Release date: Apr 9, 2015
• ISBN: 9781634172844

Book preview

Minimalist Investor

Maximum Profits

John R. Klinefelter

Taylor A. Klinefelter

Table of Contents

About the Authors

Acknowledgments

Preface

Chapter 1

Chapter 2

Chapter 3

Chapter 4

Chapter 5

Chapter 6

Chapter 7

Chapter 8

Chapter 9

Chapter 10

Chapter 11

Chapter 12

Chapter 13

Chapter 14

Chapter 15

Chapter 16

Chapter 17

Chapter 18

Chapter 19

Chapter 20

Chapter 21

Final Thought

Appendix A

Appendix B

Appendix C

Appendix D

Appendix E

APPENDIX F

Copyright © 2016 John R. Klinefelter and

Taylor A. Klinefelter

All rights reserved

First Edition

PAGE PUBLISHING, INC.

New York, NY

First originally published by Page Publishing, Inc. 2015

ISBN 978-1-63417-283-7 (pbk)

ISBN 978-1-63417-284-4 (digital)

Printed in the United States of America

About the Authors

JOHN KLINEFELTER

John Klinefelter majored in Psychology and minored in Mathematics. Presently he divides his time by researching and investing in stocks and options and working in real estate as a licensed real estate broker. Over the last 10 years he has researched and developed some unique methods of investing that are significantly different than the standard methods utilized by most investors.

He was formally the Director of the Selection Consulting Center (a joint power authority consisting of 7 different governmental agencies) which developed valid procedures for selecting higher level managers, police officers and fire fighters. Over the years he was the recipient of numerous grants from the federal government on developing Assessment Centers for the selection of higher level managers.

Over the last 30 years he has invested in rental property and at one time with his wife owned 19 rental properties in California.

Some of his hobbies involve tennis, chess, reading, bridge and inventing. He has traveled to over 63 countries.

Taylor Klinefelter

Taylor Klinefelter is a senior at the University of Oregon majoring in economics. He took a couple of years off of his formal studies to work for his grandfather, John Klinefelter, during which time he gained practical, real-world knowledge of stocks and options. After learning the ropes and developing some successful strategies, the two embarked on a project to compile their knowledge into a cohesive piece of work. When not focused on academic pursuits, Taylor enjoys playing the guitar, traveling, and various outdoor activities.

Acknowledgments

Thanks to my wife, Valerie, who has loved and encouraged me and tolerated my obsession for investing. It was her aversion to our losing any money that inspired me to develop the techniques described in this book.

Thanks to my son, Terry, for his efforts in typing and proof reading the entire manuscript. Also thanks to my son Mark, who with Terry helped me develop a deep appreciation of what is important – family!

Naturally, I owe a special thanks to Susie, Terry’s wife, for raising two fine sons, Spencer and co-author, Taylor. They were an immense help to me in researching and writing this book.

--John R. Klinefelter

I would like to thank my parents, for constantly proving to be life-long sources of encouragement, wisdom, and motivation to succeed in all my endeavors. My awesome brother, for helping in gathering the necessary research and translating the aggregated findings into something that approaches readability or comprehensibility to the reader. Also, for keeping me sane and making growing up unforgettable.

I also need to thank my grandfather, John, for having the patience and willingness to teach me the ropes of investing and consequently igniting my passion for the subject. He also had the extraordinary idea to challenge conventional wisdom and simplify things back to the realm of common sense. Without his years of knowledge and first-hand experience, none of this would have been remotely possible.

Finally, I of course have to thank my grandmother Valerie, who supported us and this endeavor in literally every way imaginable.

And to all of the family members as a unit: thanks for all the love and support over the years.

Taylor A. Klinefelter

Preface

The Purpose of this Book

There have been numerous books published on how to invest in stocks and options. Many are not just good but are classics and have stood the test of time. While most of the books are useful, sometimes they are overwhelming in the sense that they are difficult to read and understand, or their methods are difficult to implement. This book is designed to help the average investor and give the experienced investor another perspective on investing.

I think my system of investing based on minimalism will allow most people, who use it to profit handsomely, without consulting advisors (financial experts) or paying fees to have someone manage their money.

In this book I explain how to evaluate stocks, how to select winners, when to buy, when to hold a stock, and when to sell. I give the reader all the tools they will need to do this on their own. In addition, I explain how you can do the above quickly and accurately with minimal effort. I also explain how to use options to successfully invest in stocks, and I show how to:

Use other people’s money to leverage your investments.

Conservatively generate many times the interest that one could receive on CDs, bonds, and dividend paying stocks.

Protect your profit and still retain your stocks.

Profit in an up or down market.

Chapter 1

Background

It was a dark and stormy night; I was attending a party, and they laughed at me when I mentioned that I was writing a book on investing in stocks and options. A question, in so many variations, was asked, What do you know about investing in stocks and options that hasn’t already been discussed, explained, and touted by experts in finance, investing, and economics? Further, What can you add that isn’t explained daily in the Wall Street Journal (WSJ), TV networks such as CNBC, Bloomberg, and Fox Business? The answer—MINIMALISM.

Investing is a daunting and complex task for most people. The average person feels quite inadequate in taking their wages or life’s savings (or some portion of it) and investing in stocks and bonds. There are literally hundreds of concepts one is expected to grasp when investing—cyclical vs secular markets, market cycles, P/E ratios, dividend yields, stock price, interest rates, fundamental and technical analysis, charting, mutual funds, ETFs, tax consequences, etc . . . Quite frankly, most of these concepts are hard for the average person to grasp if they have had little or no training in finance or accounting.

I started investing in stocks in the early 1960s, and bonds in the 1980s. My wife and I made a small fortune in real estate in the ’80s and ’90s in California. We owned nineteen single family homes (rentals) at one time, and sold sixteen of them before the real estate market started declining in 2005. So having a large amount of money to invest we put it into CDs, bonds, and stocks. Ashamedly I rode the dot com craze up to dizzying heights and heart stopping lows. I did learn several things over the years:

Nobody will invest and watch your money as well as you can.

Use financial expert’s or stock analyst’s opinions judiciously and don’t make your investments based on opinions or tips from friends or strangers.

What I have done over the past twenty years is read about every book on investing. I have tried many different systems—and have lost and made hundreds of thousands of dollars; sometimes in only days or weeks. I’m confident that I have adopted, plagiarized, copied, and adapted every system that works. In the last five years I have made over $1,340,672 using my techniques. See Appendix A for summaries of beginning and year-end broker statements. No monies were added to the two IRA accounts. In the trust account any monies added were subtracted before calculating yearly gains. Throughout the years in question, I always maintained large cash reserves, so any money added to our trust account remained in cash. This meant any money added did not contribute to the gains made as the money funds made nil interest.

My systems are simple, as they are based on MINIMALISM.

Bailing Out of the Market Is not the Answer

People who bailed out of the market in panic in 2008 and early 2009 lost a lot of money if they didn’t get back into the market and participate in the near recovery in the latter part of 2009 and early 2010. Bull and bear markets come and go. So far in the history of the stock exchange, markets that correct have always come back, eventually reaching new highs. In the stock market decline that occurred from September 2008 to March 2009, while the S&P 500 declined 37.5%, my investments declined 31.14%. I decided not to withdraw from the market and in fact kept investing cash that was in my accounts from time to time and by December 2009 I had made all my money back. In fact, my accounts were actually up by approximately $10,000.

My advice is, don’t put all of your money into the market.

Always have alternative investments in the form of CDs, bonds, or real estate.

Decide how much you’re going to put in the market and think long term.

It is always a good idea keep six months of cash or cash equivalents on hand for emergencies or investment opportunities.

Don’t try to time the market; you must allocate your funds among different investments. In other words: diversify your investments.

Also, don’t try to day trade. Most people who trade each day eventually lose money. In addition they must keep glued to the computer while the markets are open.

My methods do beat the markets, and almost all professional fund managers and analysts.

March 2009 was the depth of stock market’s corrections. From the beginning of 2009 to the end of 2013, my accounts have actually outperformed the S&P 500 index by a fair amount.

My Accounts Yearly Increases vs S&P 500 Yearly Increases

*My accounts include 2 IRAs and a trust account

From January 2, 2009 to December 31, 2013

S&P 500 increased from 902.99 to 1848.36 or 104.69%

**My accounts increased from $648,507 to $2,152,179 or 231.87%

I beat the S&P 500 by 127.18%

Please note that there are two authors to this book, but all monies invested were by me (John Klinefelter). Additionally, I have three accounts in Schwab which are 1.78 times larger than the Fidelity accounts reported here.

See appendix A for a summary of my broker statements for Fidelity Investments from 2009–2013.

Cash Reserve

Throughout the years listed above I have been using my techniques that involve buying and selling stocks and options in a conservative, safe manner. Each year I have kept a large cash reserve. For example, in my trust account which increased in 2013 from $1,327,234 to $1,823,183 I kept a monthly cash reserve that ranged from $273,350 to $515,018. On average my monthly cash reserve amounted to 25.76% of my trust account value. No money was added to our IRA accounts during the five-year time period. $50,000 was added to our trust account in 2012 but was subtracted out of the year-end final total to determine the 17.73% increase for that year.

Most good books on investing boil everything down to a few simple rules and suggest you use common sense when investing. My methods involve uncommon sense. Almost every book on investing will tell you to buy low and sell high and don’t let your profits become losses. Read on and you’ll discover that not all truisms are necessarily the best way to make money.

My book as outlined below will show you how to invest in stocks and utilize options to magnify your investment returns. It covers:

A) How to invest in stocks:

Do minimum fun work in identifying and selecting stocks and options for investment.

Know when to buy stocks

Know when to sell stocks

B) How to utilize options:

Sell high and don’t buy

Annualizing returns

Augment gains on a stock you already own

Don’t buy stocks and still profit

Sell high and sell low and make money

Create a synthetic stock

Create a synthetic dividend from a synthetic stock (which is real money)

Protect your gains in a declining market

Profit when the market goes up, down or sideways

Earn more than you can with CDs or bonds and dividends in a shorter amount of time

Create a white swan from a black swan

Buy shares at a lower price than they are currently trading, even if the stock goes up before you pull the trigger

Take profits automatically

Obtain a year’s worth of stock appreciation in five minutes or less

How to turn a losing position into a winner

Invest for the new normal and/or the old normal

Beat mutual fund and ETF managers consistently

Sell high, buy lower, and sell lower still and make money

See chapter 16 for an in depth explanations of these money generating techniques.

Actively Managed Portfolios Versus Passive Index Funds

It is very difficult to make money in the stock market continually. One of the big challenges facing investors is where to put their money. Many people simply leave the decisions up to professionals, after all it is their job, but are professional investors really worth the fees they charge? Or is simply going with the flow of the market an efficient enough strategy to use and feel safe?

Past academic studies have indicated that professional investors are not