The One Place You Haven’t Looked for Safe, Reliable Income

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You've probably heard a dangerous myth repeated by numerous financial experts and the media. It may have prevented you from fully enjoying your retirement, or caused you to worry that you won't have enough money when you do retire.

That myth is that low-interest rates mean you CAN'T earn a substantial income from your current nest egg.

Today I'm going to show you that this myth is entirely incorrect. Simply put, low interest rates shouldn't stop you from safely earning high yield from your investments. I'm going to show you that you can safely earn 8-12% in income each year - without going out of your comfort zone.


Ben Bernanke and the Fed have been pushing investors to trade in their bonds, and buy stocks. And given the low yields from most fixed income investments, stocks are clearly a better deal. Today, you can safely collect 2-5% in dividends from safe blue chip stocks.

But that's still far below the 8 - 10% annual returns that most investors want. So how can you earn this extra income, without taking on lots of risk?

All you have to do is learn one simple transaction. This easy to execute strategy could help you collect considerable extra income from dividend stocks you already own.

This investment strategy is known as "covered calls." And this is how it works:

Suppose you own 100 shares of  Cisco Systems (Nasdaq: CSCO). You think the stock is range-bound, and is unlikely to rise much over the next few months. Shares are currently trading at around $24.27.

Using a covered call strategy, you can sell a November call at a strike price of $26. A "call" is simply the right to buy 100 shares.  And the strike price is the price at which the stock will be sold.

So in this example, you're selling another investor the right to buy your shares anytime between now and November at $26 per share. In exchange, you'll pocket a "premium" of almost $55 right now.

Before I go on, it's important to understand why someone would want to pay you for the right to buy your stock. The reason is that many investors are gamblers. They like to make a bet that your stock will go higher.

And that creates an opportunity for you. Because if Cisco shares stay below $26 by the third Friday in November (88 days from now), that option expires. You keep the $55 in extra income, and you still own your Cisco stock.

Now, the biggest risk to this strategy is that it limits your upside. In this case, your position benefits up to a $26 stock price. Any gain in the stock beyond $26 is essentially "owned" by the investor who buys your call. So the maximum per share gain is $2.28 in stock appreciation ($26.00 - $24.27) plus the $0.55 in premium.

If the stock moves above $26, the option will be exercised and your shares will be called away. Cisco currently pays an annual dividend of 2.7%. But you could earn an additional 9.1% of investment income over the course of the year if you choose to use this proven strategy. Combined, you could earn an 11.8% income stream from a blue-chip stock like Cisco with a few, simple steps.

You can quickly see why so many professional money managers use this easy strategy for their clients.

Next week, Ian Wyatt and I are hosting a FREE live webinar to share all the details of this income investment strategy. This event is titled  "60-Second Dividends: Instant Income from Blue-Chip Stocks."

We'll reveal all the details about two of our favorite ideas. Are you ready to learn how to collect an income stream of 7% - 13% from two of the biggest and safest blue chip stocks? You can reserve your seat for this event today -  just click here now.

We have limited seats available for this free investing seminar.  I expect that we'll fill ever seat within the next couple days.  Just take a minute today to reserve your slot.



The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ OMX Group, Inc.



This article appears in: Investing , Stocks

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