I’m revealing my favorite short-term investing
strategies, ideas you can use to make a living or just make extra cash. In fact, I used one of these strategies to
make over twenty grand in two months. We’re talking the best investments for fast
money today on Let’s Talk Money. Beat debt. Make money. Make your money work for you. Creating the financial future you deserve. Let’s Talk Money. Joseph Hogue with the Let’s Talk Money channel
here on YouTube. I want to send a special shout out to everyone
in the community, thank you for taking a little of your time to be here today. If you’re not part of the community yet,
just click that little red subscribe button. It’s free and you’ll never miss an episode. We usually talk about long-term investments
on the channel, those investments you can buy and hold forever with the confidence they’re
going to help you create that financial future. But there’s also something to be said for
those short-term investments with the potential to make you a lot of money in a matter of
months or even weeks. I made over twenty grand on futures contracts
for oil prices in two months to May 2016 and regularly use these kinds of investments for
big gains. So I want to walk you through the five best
short-term investments I use, how to get started and how much you can expect to make. Understand though that there are some big
differences between short-term investments and the long-term investing we usually talk
about. Short-term investments are more of a bet on
investor sentiment or a certain catalyst for an investment rather than investing in the
fundamentals. This makes short-term investments much more
risky because it’s an either-or kind of idea. Your bet on the price either works out or
it doesn’t in that time period. With long-term investing, you can be right
even if it takes a while to work out. Many of these short-term investments are also
riskier because of leverage or being able to bet thousands while only putting down hundreds. You can get 20-times your money or more on
futures contracts. That means even a five percent return doubles
your money but it also means a five percent decline can wipe you out. Short-term investing is also going to mean
a lot more work. Don’t expect to just flip over to CNBC and
get everything you need in five minutes. To make this work, you have to be ready to
put in the time to really analyze an investment, understand why the price is where it’s at
and why it should be somewhere else in the next month. With all this, these kind of investments aren’t
going to be for everyone. There’s nothing wrong with putting your
money in a solid portfolio and just enjoying those long-term returns. No stress, very little effort and you can
still reach your goals. But if you’re ready for it, these short-term
investing strategies can make you a ridiculous amount of money. Besides that twenty grand I made on oil futures,
I’ve made over $37,000 over the last three years on foreign exchange futures and regularly
make double-digit returns on options strategies. This is going to be an epic video on five
short-term strategies including penny stocks, leveraged ETFs, Futures, Forex Trading and
Options so you might want to bookmark it as a reference. I’ll show you how to get started, some of
the risks in each and some of the strategies I use. Our first short-term strategy here is probably
the most popular and that’s penny stocks. Penny stocks don’t have a formal definition
but generally it’s any stock that trades for under $5 a share and has a total value
of less than $50 million for all its shares . Basically, we’re talking about nano-cap
stocks which are as small as it gets with publicly-traded shares. Now penny stocks can also be good long-term
investments but because they’re so small, they tend to be extremely volatile. Just one headline good or bad can send these
stocks surging or crashing and it can take years for that longer-term trend to make it
a good investment. Because of that, most investors trading in
penny stocks do it for a fast return catching one of those good headlines. Penny stocks are easy to trade because they’re
traded on exchanges and available on most online investing platforms. There are a few risks in penny stocks that
you need to understand. First is that there’s usually very little
public information or history to go off of. Most big bank analysts aren’t going to be
looking at these because there’s just not much demand for the shares so even if the
analyst can convince investors to buy, the commissions aren’t going to be very big. Another risk is that because there aren’t
many investors interested in these shares, there aren’t usually many shares traded
on a daily basis. That’s a problem for two reasons. First because if you want to sell quickly,
you might have to take a few cents hit but also because these stocks are susceptible
to pump-and-dump scams where someone will drive the share price up with marketing, sell
their shares at a profit then of course the shares crash when there’s no one marketing
them. There are a few places penny stocks trade
including the Nasdaq, OTC bulletin board and the pink sheets. Now the Nasdaq and OTC have a little stricter
listing requirements like financial reporting and regulation by the Securities and Exchange
Commission. The pink sheets are a fraudster’s dream. There’s almost no regulation and very little
in terms of oversight so I’d seriously steer clear of these stocks. Stick with those listed on Nasdaq or the OTC. You also want to just ignore any penny stock
you hear about in an email or a newsletter. There are some great short-term investments
out there but remember these are prime targets for scammers. An example of a good penny stock here is Medical
Transcription Billing, ticker MTBC on the Nasdaq. Now this medical tech company is almost at
$5 a share now but was just $0.75 in December 2016 when I bought shares. I worked as a labor economist for five years
and can tell you that medical transcription and that larger healthcare tech space is hot
so I started looking at this one earlier in the year. Turns out they had some patented voice-interactive
software that was hugely innovative and I thought the stock was a no-brainer takeover
target. The shares jumped pretty quickly as the rest
of the market watched it but it took a little longer to really take off. I ended up cashing out at just over $2.80
a share about 11 months into the trade for a 273% return. Now something that is going to apply to most
of these short-term investments is the difference between technical analysis and fundamental
analysis. So there’s a whole group of investors that
only trade on the movement in the price of an investment. They measure how far the price has gone over
a period or how fast and compare that to history for that investment. This is called technical analysis. I’m not going to say much about this type
of investing because, one, I’ve never used it much. I’ve followed some basic charting but stick
mostly to fundamental analysis which is looking at those external and internal factors that
drive an investment. Another reason we won’t talk about technical
analysis here is, it’s debatable whether it really works unless you’re ready to make
it a 9-to-5 job at your computer every day following these patterns. Now I know I’m going to get flamed in the
comments by a thousand wannabe day traders with a fool-proof system but whatever. I’m working off nearly two decades of experience
in equity analysis and investment management and I’ve never seen a technical strategy
outside of algorithmic trading that made any money. Instead, when you’re looking at penny stocks,
there are some fundamental factors you can watch to make smart bets in the share price. For penny stocks, you really have to get familiar
with the statement of cash flows. That’s going to show you the cash generating
power of the business and it’s a purer way of looking at the company’s financial position. Management can manipulate profits and earnings
per share pretty easily but it’s much harder to fudge the numbers in actual cash flow. Now most penny stocks aren’t going to have
much cash flow but there are a few things to look for to make sure the company has the
cash necessary to survive until your catalyst for growth comes out. We’ll use Insignia Systems as an example
here. Shares trade for about $1.80 each for this
developer and marketer of in-store advertising and it’s a stock I’ve been watching. First you want to look here at the cash flows
from operations, this is something I look to for any company but especially very small
companies. Ideally you want to see growth but that the
company is generating positive cash flow is a must. Here we see that Insignia Systems has booked
positive cash flow for the last three quarters which is a good sign considering the company’s
history. Then you’re going to look to the other sections
to see where the company is spending its cash and then the change in cash at the bottom. It’s OK to have a negative change in cash
if the company is spending heavily on investments but it needs to have the reserve cash to fund
it. Insignia doesn’t have much to show in these
other two sections but we see it’s built up $8 million in balance sheet cash which
is nearly half its market cap. Looking deeper into the financials, Insignia
has no debt so that $8 million in cash and positive cash flow makes it an attractive
target for an acquisition or just gives it a lot of flexibility to grow. Our second short-term investing strategy is
in leveraged ETFs. Now most investors are familiar with regular
exchange traded funds. These are funds managed to hold an index or
investing theme by actually holding the investments in a certain proportion. So you might have the Technology Sector SPDR,
the XLK which holds shares of 67 tech companies. For the ability to buy and hold all 67 companies
with one trade, you pay just 0.13% a year as a management expense fee. Now leveraged ETFs are special funds created
to multiply the returns on a sector or theme. Instead of holding the shares, they create
the 3-times or double-returns with a combination of swaps and derivatives. Let’s look at a table of the most actively
traded leveraged ETFs as an example. You have the name and fund symbol. Leverage means how many times the fund should
move versus the sector so if tech stocks increased by two percent you would expect this first
fund to jump by six percent. The focus column is the theme or sector in
which the fund invests and the position is whether the fund benefits when the sector
rises or falls. So if you are in a short fund, a negative
position, the price of the shares would go up if the sector fell. There are leveraged funds for all kinds of
themes including sectors like technology, energy and healthcare to emerging market country
stocks like China and Brazil. These leveraged ETFs are traded just like
stocks so you can buy and sell on any online investing platform. Now there are some important things to know
about these, some that mean these should only be used for short-term trading. First is that the expense ratio on these funds
tends to be about twice what you pay on other ETFs so it’s definitely not something you
want to hold long-term. If you want to leverage a long-term bet on
a sector, it’s a better idea to go with options which we’ll talk about later. Leveraged ETFs are rebalanced daily, which
means the portfolio manager has to buy and sell the financial products to maintain that
three-to-one ratio. This creates a drag on the fund so the actual
return isn’t usually exactly that three-times the return on the sector. What leveraged ETFs are good for is that very
short-term bet or protection on a trading idea. For example, if you were heavily invested
in tech stocks but afraid that the sector would drop hard in the coming month, you could
invest in this ultra short SQQQ to actually make money and not have to sell out of your
shares. Our next short-term investment is futures
contracts on things like metals, currencies and agricultural goods. Futures are financial contracts to buy or
sell something at a set date and price, usually in the next month or few months. Most futures contracts are bought or sold
as a way to reduce risk. For example, a farmer might sell October contracts
for wheat. The contract sets a price they’ll get months
in advance so they don’t have to worry about prices in the meantime . On the other side
of that, a food processor like General Mills might buy those contracts so it locks in its
price for that wheat it needs to make your breakfast of champions. Futures can also be used for investment. You can buy those contracts for wheat if you
expect the price to go up then sell them before the delivery date . But here’s the beauty
of futures contracts, you can buy contracts worth hundreds of thousands of dollars for
just a few grand. For example, each single contract for West
Texas Intermediate or U.S. crude oil, is for one thousand barrels. Now at the current price around $70 a barrel,
that would mean seventy grand per contract to buy or sell depending on what the futures
price was. But you’re only required to deposit about
$3,500 for each contract. So you can bet on the price of 3,000 barrels
of oil for about ten thousand dollars. That’s about 20-to-1 times your money. So let’s do the math here and this is an
actual trade I made in 2016 after the price of crude had bottomed in February at around
$26 a barrel. By March it was clear that prices had gone
too far and were on the rebound so I bought two contracts for $38 a barrel for May delivery. The current or spot price at this point was
just under $36 so the market was expecting price to go a little higher but not much. I put down $7,000 for the three contracts
worth $114,000 but this was actually more than I needed to deposit. I could have put down as little as $5,700
for the investment. Crude prices kept climbing and by May had
reached $45 a barrel when I sold my contracts. Remember that each contract is worth 1,000
barrels so the three contracts were now worth $135,000 or a gain of $21,000 from the original
price and I had made three-times my investment in two months. That’s potentially a 4,000% annualized return
or 40-times your money but like all the jackpot investments we’ll talk about there’s a
huge risk here. If the price had gone the other way, I could
have lost my entire investment in a heartbeat. In fact, I remember one trade in 2012. I was trading gasoline futures and there was
an explosion at a Canadian refinery overnight . The price of gasoline spiked like four percent
overnight. Since I had shorted the contract, betting
the price would go down, then I lost over ten grand on the investment. There are five types of assets that trade
with futures contracts. You can buy or sell energies like oil, gasoline,
heating oil, natural gas and ethanol. There are contracts for currencies with the
dollar, euro, British pound, Yen and Mexican peso all heavily traded. You can buy or sell contracts on the direction
of the stock market. There are contracts on the metals including
gold, silver, aluminum and copper. And finally almost any agriculture commodity
will have a contract so corn, wheat, soybeans, rice, coffee, cattle, hogs, you name it . Most online investing platforms will allow
you to open a futures account with a broker. There is a lot more than goes into futures
trading, determining where you think the price will go and setting up your investments. I’ll do a video exclusively on futures because
it can be a really amazing investment. A few tips here though. First, always understand the downside and
catalysts for the trade to go the wrong way. You also need to set stop orders so if the
price goes against you, you don’t lose too much money. It’s also a good idea to trade in a few
different types of assets so that if one trade is losing money then maybe the others will
support your profits. One thing that’s going to be important for
futures and for forex trading which we’ll talk about next is to focus on a specific
asset in the market. You can’t expect to be successful if you’re
trying to trade every contract available, if you’ve got bets on metals and currencies
and ag products. To really make money in these investments
and see the turning points in the price, you have to become an expert in the asset. That means understanding the current political
environment in key supplier countries for the metals, understanding how potential interest
rate changes are going to affect the asset. For each asset, there are a list of factors
to watch for and understand so you can make a smart bet on the price. This next investment, currency trading, is
part of that futures idea but I really like this one so wanted to give it its own section. Most investors don’t know it but the foreign
exchange or forex market is actually the largest in the world with over $5 trillion traded
every day versus less than a fifth that for stocks. Forex offers some of the highest leverage
with 50-to-1 bets and even higher for day trading. Currencies are always traded in pairs, usually
the value of a currency versus the dollar. There are dozens of currency pairs available
but like all the short-term strategies, it helps to focus on a few to limit the amount
of research you need to keep up with. Through buying or selling these pairs, you’re
betting that the value of one currency is going to be higher or lower versus another. What I like about forex is that the biggest
factors that affect currencies are big economic forces like growth, interest rates and capital
flows. Since these are all regularly reported, you
can trade forex exclusively around the releases of these reports. That’s something you can’t necessarily
do with a lot of the other futures. When I was trading energy futures, I was constantly
trying to keep up with all kinds of supply and demand headlines. Futures trade 23 hours a day so you can be
waking up at 2am worried about your trades and it’s constant stress. So being able to just put on a futures position
ahead of an economic release and then take your profits afterward is a good way to limit
that round-the-clock stress and the amount of research you need to do. Our next short-term investment is through
options trading. Options are contracts to buy or sell stocks
but with a very important difference from Futures. Buying an option gives you the right to buy
or sell a stock but not the obligation. So there are two types of options. A call option gives you the right to buy shares
while a put option gives you the right to sell shares. When you buy or sell an option, you’ll see
an expiration date which will always be the third Friday of the month, you’ll see a
strike price which is the price of the shares for that option and you’ll see the price
of the option. Let’s look at an example to make it easier. We see here that shares of Apple are currently
trading just under $204 per share, this is mid-November. Now I’m looking at the January 2019 options
so this investment will expire on January 18th in a couple of months. I can buy call options at $200 per share which
means I can get the right to buy Apple for $200 a share in January, that’s the strike
price. Now for the right to do this, I have to pay
about $12 a share, that’s called the premium for the option. So if I pay $12 for the right to buy Apple
at $200 in January and the price of the shares goes to $240 by that time what does that mean
for me? That option would now worth at least $40 right,
because if it was less than $40 someone could just buy the option and then sell the shares
immediately for a riskless profit. So instead of buying the shares, I could just
sell the call option for $40 and a return of 233% on my money. Each option contract is for 100 shares so
one contract would have cost me $1,200 and I could sell it for $4,000 or a profit of
$2,800 for each contract that I bought. Remember, options come in two types, call
and put. So if I thought Apple shares might fall then
I could buy a put option which would give me the right to sell shares at a certain price. Going back to the example, I could get the
right to sell shares at $200 for $7.59 per share. If the price goes down to under $192.41 by
January, that’s $200 minus that price I paid for the right to sell the shares, then
I’ll make money. Options can also be used for protection and
this is primarily how I use them. So if I own shares of a company and I’m
worried about the price going down over the next few months, I can buy a put option for
the right to sell my shares at a certain price. I’ve effectively locked in that price as
the lowest I’ll get on the stock even if the market price falls further. The important thing to remember here is that
buying an option gives you the right but not the obligation to buy or sell a stock. So if I buy those call options on Apple and
the share price isn’t above $200 in January, I sure as hell am not going to buy them for
$200 each. I would just let that option contract expire
but I would lose the $12 per share I invested. Similarly, if I bought put options against
a stock I own and the price of the shares didn’t fall then I’d just hold on to the
stock. The price I paid for the put options would
be gone but they did their job, protecting me from any short-term weakness. Now the payoff for the Apple options wasn’t
huge because that strike price was very close to the actual price, so we weren’t betting
on a big move in the shares. Let’s look at another example to see how
options can make you rich. Here we have January options for shares of
McDonald’s. I’ve picked McDonald’s because it’s
a stock that doesn’t normally see big changes in the share price. That’s important for options trading because
it will be built into the price you pay for each contract. If the shares jump around a lot, it will cost
more for the right to buy or sell the shares because there’s a higher chance the shares
will be much higher or lower by expiration. Say we’re expecting shares of McDonald’s
to absolutely tank by January from trading at about $182 per share right now. Maybe we have a lawyer connection that says
Ronald McDonald is being sued for alimony or John Amos has just opened up a McDowell’s
down the street from every restaurant. Either way, the happy meal ain’t so happy. So we can buy a put option to sell the shares
for $145 each and pay just $0.36 or $36 for each contract since an option contract is
for 100 shares. Now if shares of McDonald’s plunge 35% by
January to $118 then our put option is worth at least $27 each because we have the right
to sell shares for $145. That $36 we put down for each option contract
is now worth $2,700 or a 7,400% return. To trade options, you only have to be approved
on your online investing account. That usually requires a minimum of a few thousand
in the account but that’s about it. Like I said, I generally just use options
to protect my investments or to make a little more money from them but you can make a lot
of money very fast. There are some different options strategies
you can use but the idea is you need a strong reason to believe the price is going to rise
or fall quickly. You have millions of other investors looking
at each stock and all their expectations for the stock price are built into the options
prices so that average market expectation has to be wrong for some reason. Now in my example above, finding out from
your lawyer friend about Ronald’s legal troubles would be insider trading and you’d
go to jail but there are a lot of other ways to find why you think a stock should be much
higher or lower. Again, I would suggest having options bets
in several stocks to diversify your risks. Stop loss orders can also work here to limit
your losses and don’t feel like you have to make an option bet on every stock you think
should be higher or lower. Be selective where you place your money. Each of these short-term investments could
be an entire series of videos. I’ll be putting together videos for options
trading and futures soon so watch for those. I’d love to hear from you in the community,
what are your favorite quick investments and how do you trade them so scroll down and tell
us in the comments below. We’re here Mondays, Wednesdays and Fridays
with the best videos on beating debt, making more money and making your money work for
you. If you’ve got a question about money, just
scroll down and ask it in the comments and we’ll answer it in a video.