Q:”So What DO You Do For a Living?” A: Not a Damn Thing…


Many people know I do debt consultation for the legions of minorities everyone else in society has given up on. I do this because I have strong beliefs that we as minorities are systematically set up to lose financially from birth. Many of you also know that as of right now, I do this for a little over 500 people and that with every single last one of those people, I charge them absolutely nothing. Again, its what I’m passionate about and have developed a ton of knowledge/know how on. If I don’t make the best out of what I’ve learned, then it really is a waste now isn’t it?

Still… none of this changes the fact that at the end of the day, I need to eat just like each one of you.

So then how exactly do I make my money you ask? How do I pay my bills? Well… the truth is…I don’t. True, due to my frugality I have fewer bills than the average person, yet in still, little I do physically each month pays for any of them. This is only possible because I no longer work for my money.  My money works for my money.  Allow me to explain.

For those not familiar with investing in bonds, commodities, the stock market etc and how it all works, I urge you to at the very least take a free course at Wikipedia University (yes I just called it that) so that what I’m about to say to you makes atleast a little bit of sense. For those that are somewhat familiar, lets move on.

Within the stock market, there are three types of players:  traders, long term investors and those who do both at the same time. I do both at the same time, however, the investing portion makes a whole lot more but doesn’t pay the immediate bills due each month and is instead set up for long term gains. For this reason, we will discuss trading.

First thing you must understand is that you will never make more trading than you do with long term investing.

Though I’ve added my own little touches, the trading method I primarily use is sometimes referred to as a Pyramid trade. Myself, I like to think of it as similar to the way you might play chess. Pawns are dispersed first, then followed by knights second, bishops third, rooks fourth and then finally the queen. Now make no mistake, in this strategy, you really don’t want to see my queen come out to play though. It gets pretty ugly at that point and you’ve basically paid my living expenses for an entire year if I move her on all of my trades. Lets continue to break down exactly how this works.

First, I keep 8 good ETFs on a watchlist at all times while using only 4 of them to trade at any one time. These funds are NEVER ones that swing up and down wildly like lets say 10% on Monday and then another 15% on Tuesday. They are always large, well diversified ETFs that don’t move around much more than 5% during most weeks. Also, these exchange traded funds MUST be funds that I also hold in my long term investment portfolio. I will never put money in a product even for 10 minutes that I wouldn’t want to own for 10 years – no matter if its just for a trade or not. For this specific example, we are going to use the following four ETFs – Vanguard Small Cap Value, Vanguard Dividend Appreciation, Vanguard Emerging Markets, and Vanguard REIT. Vanguard Small Cap Value (VBR) will be our main example.

Next, I take the amount of money I want to use and break it down into 5 pieces. Remember, no fund or stock on earth goes straight up or straight down so the 5 pieces help you to never be tempted to buy all at once. For this specific example, we are going to take an arbitrary number like $100k and use that as the amount available for our trading while using the assumption that the fund price will go down before it goes up. Of that $100k we are going toimmediately take $38k and set it aside for emergencies outside of our expectations. Since we are using Vanguard Small Cap Value as our primary example, the remaining $62k will be broken down into five different purchase levels starting with the first level(A) being used to buy VBR at a discounted $7 per share. Each purchase level after that is based on the price of VBR’s shares dropping 5% from the previous level I last bought shares at.  Also as I approach the next level down, I use twice the amount of money I used on the previous level I just came from. Visually it sort of resembles…yes, you guessed it…a pyramid. And since we are using 1/4th of our trading account on BofA, the specific levels are as follows:

  • A Level: $500 is used to buy 31 shares at $7/share
  • B Level: $1,000 is then used to buy 66 shares at $6.65/share
  • C Level: $2,000 is then used to buy 139 shares at $6.31/share
  • D Level: $4,000 is then used to buy 292 shares at$6.00/share
  • E Level: $8,000 is then used to buy 614 shares at $5.70/share
  • Total amount used if share price drops through all levels: $15,500 (or 1/4th of your $62k available)
As each level is hit on the way down and I purchase the appropriate shares at each price, at a certain point usually within 1 or two weeks, the price jumps up a level or two allowing me to use the same strategy to sell the shares and exit. Here is how the profit breakdown works if I sell at each level on the way back up and assuming (A )level also rose 5% once after we reached it again:
  • A Level: ($25 profit)
  • B Level: ($52 profit)
  • C Level: ($105 profit)
  • D Level: ($212 profit)
  • E Level: ($423 profit)
  • Total profit if each level was bought and sold: $817
So what is the typical time frame one of these funds successfully breaks through all levels? In this market it could be every month or two depending on where your A level is set. But heres the thing. You don’t need each level to be reached to make your money. Imagine if Bank of America traded only between C level and D level but did so about 8 times during a given month. Assuming it traded 4 times at C level and 4 times at D level, then that leaves you with a profit of $1268 for that month. Also, don’t forget that we only did the numbers for one of four ETFs that you are currently trading so by multiplying that profit amount by 4, you are left with  $5,072 each month to pay your bills.  So as you can see, a trader’s best situation to be in isn’t when their target fund goes up or down tremendously but rather when it goes nowhere  (even though we have plans in place to profit if it does drop significantly or if it raises significantly). Lastly, you should also take into consideration that $100k was just an arbitrary number used to invest in this example. Imagine the monthly profit the above trader would make if they used $200k? (about $10,144/month)  $500k? ($25,360/month) Or even $1million? ($50,720/month).

Oh…did I mention that this is all something you automatically setup to do on your behalf using your brokerage account software? So you are essentially doing absolutely nothing each month while your bills are paid. No, you really don’t need to pay attention to the news, read anything online or panic when reading all the headlines that the average investor is bombarded with. All you need to do is program your brokerage account and go out and do whatever the hell YOU want to do during the day while 98% of America slaves away. Damn it feels good to be weird.

Again, this isnt for most people to do or for most people to even try. In all reality you shouldn’t even be attmepting to do this with accounts that have under $25k worth of investable assets. Once you subtract commission fees (accounts over $25k dont pay commissions) and taxes from short term gains then the amount  made on sub $25k accounts typically doesn’t amount to much.  Those accounts should be relegated to long term investing only.

Instead, this was written for those who ask me all the time how they can compensate me after I help lead them on their path to becoming debt free. As long as you actually listen to what I try to explain to you and do the steps to emerge from being in debt, then you are compensating me. As far as financially, once you have no debt and your money working to make you money, you really don’t need compensation from anyone.  Remember, wealthy people do what they want and focus on things they believe in each day. The poor do what they must. At the end of the day, it doesn’t matter that much about how many millions you have or don’t have as long as you control the most valuable asset on this planet – time.

So for this reason, when people ask me what I do for a living, I tell them: “I don’t work to live so I have no idea. You might wanna ask my money though…”

-Man Against Debt

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8 thoughts on “Q:”So What DO You Do For a Living?” A: Not a Damn Thing…

  1. Just discovered your site, and it’s my new favorite. I’ve been telling all my my friends about it.

    Anyway, this technique bears some resemblance to one described in a book I read a few years ago called Automatic Investment Management. I’s not exactly the same, though – is this something you developed yourself? Or did you learn about it in a book or on a site somewhere (the one in the photo, perhaps?).

    Also, what brokerage allows you to automate this sort of system without paying commissions? I am very interested to hear.

    Thanks for a fantastic site.

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    1. Sean thanks so much for spreading the word.

      I have yet to read automatic investment management but I will look into it. The strategy described above is something I’ve been working out the kinks on since late 2007 and now have the most polished version that works for me. I didn’t even know the strategy already existed until after I saw it being discussed by a couple traders on the yahoo finance message boards.

      Then late last year I picked up the book shown at the top of this post -millionaire traders. It also had a version of it described by one of the millionaire traders. Definitely a good book to check out for any trader.

      One thing I borrowed from the book was the whole taking a large portion and setting it aside for an emergency/crash. Previously I would use the whole lets say $100k for each trade until it was used up on each level. The trader who goes by the nickname “the man who buys crashes” described a strategy in that book that forced me to trade with smaller portions and anticipate crashes with a sizeable enough portion to where the profit would make it extremely worth it.

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    2. There are tons of different trade stations offerend by various brokerage accounts that will let you place this on autopilot and force you to remove emotion from each trade. Etrade, TD Ameritrade and BofA’s brokerage site are some of my favorites. However, you don’t even need any of that. All you really have to do is set future limit orders and watch the purchases and sales fall into your pocket. FYI- NEVER use stop loss orders however. We saw how bad of an idea that was on May 6th.

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  2. In terms of automation, I use Interactive Brokers, which I recommend. They’ve got lots of great tools for it. I was more curious as to how you trade commission-free (although the commissions at IB are so low it’s hardly worth worrying about it.)

    Good advice re: stop loss orders – they’re way too easy to blow out. IB has something called a conditional order, which is a little better.

    Anyway, I will check out that book, but I’d be very interested to hear more details about your method.

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  3. Broke whiteboy

    Great info! I’ve been trying to rap my head around trading for a while, your system actually makes sense to me. What you do is truly inspiring man, thank you.

    Like

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