In an earlier email I mentioned that there’s usually more risk involved in investments that might offer a larger return on investment. As an example, the relative safety of a passbook savings account would yield about one-quarter of one percent annualized yield while a stock option play could double your money (100% yield) in a matter of weeks. Even days.

However there is a way to make quick money or a high return on investment or both with no risk at all. You may wonder, if all that’s true, why doesn’t everyone do it? Simple. Most people don’t know where to look for these opportunities or when to act if they do find them.

I’m talking about a very sophisticated technique called arbitrage. What does it take? Money (not necessarily your own), a good understanding of the particular market you’re involved in, and a good sense of timing. Most people familiar with the term arbitrage relate it to either sports betting or the Gordon “Greed Is Good” Geckos of the world. But let’s look at it in very simple, realistic terms.

Arbitrage is profiting from the price difference between the same commodity in two different markets. People who flip foreclosed properties are arbitragers, even if they don’t know it. Here’s how it might work. Banks that allow customers to deposit the money while lending money to other customers is another form of arbitrage.

So, let’s say you have $10,000 cash in your pocket. You want that money to work for you – to make you more money. So you drive on over to the local sheriff’s sale and purchase a foreclosed property at $100,000. You give your $10,000 to the sheriff as a deposit. You’re told to come back with the other $90,000 within 30 days. Most people would go to a bank looking for a mortgage. You, being an astute investor, think differently.

You’ve already appraised the property by comparing it with other recently sold homes in the neighborhood. You know this property you just purchased is worth about $160,000. So you take out a classified ad to sell at $110,000. You quickly sell it to another investor looking for a bargain. The sheriff ultimately gets his other $90,000 and you get $20,000. You just doubled your money in a very short time. That’s how arbitrage works.

Of course most arbitrage takes place in currency markets where there’s more liquidity. Here, liquidity means the ability to quickly liquidate your holdings. For example, you can exchange American dollars for the Euro or Japanese Yens in a matter of minutes. Selling a house takes a bit longer.

And exchange rates between world currencies fluctuate daily, so the opportunities are endless if you keep your eye on the ball. Problem is transaction costs can eat into profits so it’s best if you have a big wad of dough to invest.

Of course when we talk about currencies we must consider the very best example of arbitrage there is. Unfortunately, it’s not a market you can make money in. You’d be going head-to-head with banks.

With banks, arbitrage is a simple matter of taking in money from depositors with one hand and lending it out to borrowers with the other. The depositors are lucky to get near 1% on their money today and if borrowers are lucky enough to get any money at all from a bank, it’ll cost them an arm and a leg.

Arbitrage is also very effective in the options markets, stock markets (and associated indexes) and bond markets. And again, you need money.

If you want to study arbitrage in more detail, I’ll tell you about a play in the precious metals market that’s coming down the pike pretty soon. And you can take advantage of it with a minimal investment.

First, just to be sure you’re reading my emails and are interested in earning more money, click the link below and I’ll send you to the next page which will explain our upcoming precious metals power play.

Precious Metals Power Play

 
To YOUR Success,

Business & Marketing Mentor
Phone: 805-874-2410