WHAT WE DO? WE SELL OPTIONS FOR INCOME. WE USE THAT INCOME TO BUY DIVIDEND GROWTH STOCKS!
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Posted by Martin January 23, 2021
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2021 Week 3 results


Another week of 2021 is over and it is time to post the results of our trading. But before I proceed to list my achievements of this past week, I want to share an idea of creating a weekly dividend income.

A fellow investor on social media, where I posted my weekly dividend calendar asked me why I decided to do a weekly payout calendar and not just a monthly one because the weekly calendar seems too complicated to track. I disagree with this conclusion. I am accumulating our portfolios one stock at a time and it was easy to create the calendar and keep track of each stock being accumulated.

But I got into this idea when evaluating my account #3. I wanted to grow this account faster and reinvest the dividends but when I finally decided on the plan there were no dividends coming in. In November 2020, I have received tons of dividends that allowed me to finish accumulating AT&T in that account and since then I was painstakingly waiting for the next payout. And I only received a few dollars here and there. It was frustrating, given that in this account, I had approx. 40 different companies. So I checked their payout days and found out that the majority of them pay dividends in February and most of them in the second week of February (and subsequent months). So, I receive dividends in February, May, August, and November. In other months I get just a few pennies or a few dollars only. I wait dry with nothing to do. And that was an eye-opener that I have decided to select stocks I like to own in a manner to create more even dividend distribution across all months and weeks. And, since I try to trade weekly options, I decided to accumulate my stocks to get weekly dividends too.
 

But now, let’s jump to our trading results:

 

Account Value: $26,067.20 +$3,420.71 +15.10%
Options Premiums Received: $305.00
January 2021 Options: $2,215.00 +9.78%
Options Premiums YTD: $2,215.00
Dividends Received: $0.00
January 2021 Dividends: $41.58
Dividends YTD: $41.58
Portfolio Yield: 3.59%
Portfolio Dividend Growth: 5.91%
2021 Portfolio Value Goal: $42,344.06

 

This week we received $305.00 in premiums, a total of $2,215.00 for the entire month so far. That is a 9.78% return on investment for January 2021.
I also started depositing $1,000 a month to our portfolio. That was also my goal to grow the portfolio faster. The goal value of $42,344.06 above includes the deposits of $12,000 per year. I am still paying off my personal debt and once that is paid off, I will be depositing another $1,000 per month. But, that is the future.
 

TW Account Net-Liq
 

TW Account holdings
 

The table above shows our current holdings and gains on those holdings. Adjusted columns indicate how options help to boost (or ruining) our stock holdings appreciation, or in other words, lowering the cost basis. Without options, our holdings would be up 7.60% with options, our holdings are up 10.65% (from inception on 4/1/2019). The SPX is up 32.80% since inception. So our stock holdings do not beat the market. We still beat the market thanks to trading options and generating additional income as you can see below. The market grew 2.95% YTD, our portfolio stock holdings grew by 3.67% (note this includes stock holdings adjusted by options trading, not the entire portfolio).
 

TW Account holdings Growth YTD
 

TW Options Income week 3
 

TW Options Annual Income week 3
 

TW Received vs Projected Dividends week 3
 

January 2021 started well so far and we are on track to meet and exceed our goal. My anxiety over this market is growing, however. I am happy with the market’s growth and our stocks going higher, but I can also see a lot of irrational behavior from investors out there. I stopped understanding these investors, mostly young guys, and sorry to say, mostly completely ignorant about what they are doing. Just go to YouTube or other social media channels and you will see tons of your guys boasting about their investments chasing pretty much worthless stocks or companies that make absolutely no money, no revenue, no product. They just buy these companies out of their pure existence. That’s it. Traditional values of investing, buying high-quality companies that create something and generate value are gone. Nowadays, chasing bankrupted companies such as Hertz (HTZ), Chesapeake Energy (CHK), or penny stocks that serious investors wouldn’t touch with a ten-foot-long pole are in. The funny part of all this is that many of these gamblers became rich overnight chasing these strategies and many of them became extremely cocky trying to arrogantly explain to you that your approach is stupid and that you should invest in bitcoin, or some unheard of penny stock and become rich overnight too. That is why I stepped down from social media lately (I am still present in there but very little compared to what I used to de before). I can’t stand these gamblers and their ramblings.

It will come to an end one day.

There are a few exceptions though. One of them is Daniel Pronk. I think, his insights make sense and he is looking at investing from traditional, rational evaluation of investments before deploying money. His recent video about the irrational behavior of this market and the market’s participants is exactly what I tried to describe above. We do not know whether the market would crash in 2021, no one knows, even Daniel acknowledges it, but his reasons for this bubble-like market are extremely valid.

 

 

That is the reason why I am still raising cash (investing it into the ICSH fund) for rainy days in the stock market and a potential bubble burst. That is why most of my premiums and dividends will be parked in the ICSH fund to sustain the crash should it happen. The market shows weakness and I want to have enough cash to cover naked trades (making them cash-secured). We are still seeing a Christmas rally momentum but it is weakening and if we look back in history, we may expect up to four corrections a year. I want to be able to survive that correction without forced losses.




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Posted by Martin January 22, 2021
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Why am I rolling options and not letting them assign?


A primary goal in my wheel strategy is to generate income, not to get assigned. So, simply, if I can roll the option trade away and adjust my strikes for credit, I roll. Of course, I still have to account for the eventuality that I get assigned. A stock may drop suddenly, I get an early assignment, or I won’t be nearby my computer to be able to adjust a trade that in the morning looked great but in the afternoon went south, for example.

That’s why I am creating my cash reserves to handle any assignments should they occur but I try to avoid them.

I have two main approaches to my portfolio wealth-building – one approach is to accumulate shares of the dividend growth stocks and then, the second approach is to trade the strangles around those positions. The shares generate income from dividends and on top of that, I receive premiums. And if the trade goes against me on the call side, my 100 shares cover it. If the put side goes against me, I have cash reserves to eventually buy another 100 shares of the stock. But if I can roll such strangle away in time and adjust the strikes up or down as needed and all that for a credit, I go for it and roll.




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Posted by Martin January 22, 2021
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Creating passive income with weekly dividends


Besides trading options against my positions, I am also interested in weekly dividend payments, so I added all stocks I like to own into a calendar per week, and now I am accumulating these stocks to achieve weekly dividends. I only enter stocks where I own 100 shares in this calendar (I own many other shares but not all of them are in 100 shares lots yet)…
 

Weekly Dividends
 




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Posted by Martin January 21, 2021
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My 2021 additions to our portfolio


We have successfully accumulated 100 shares of AT&T (T) and now we are moving towards accumulating our next company – Altria (MO).

We want to invest conservatively, no more risky trades in our portfolio. Thus I consider myself, as a CIO, a reasonably conservative investor. But I also would like to add some new technologies and new sectors to my portfolio.

One sector or industry we would like to start accumulating in some shares would be the cannabis industry.

In the past, I avoided investing in cannabis stocks mostly because they are traded on the OTC market and to me, they are difficult to analyze and research.

But recently, the Biden administration published their intent to decriminalize marijuana and allow medical marijuana nationwide. This would support this sector/industry growth beyond the current levels. Moreover, many good cannabis companies can up-list away from the OTC to any regulated market. And if that happens, big institutional investors such as mutual funds and ETFs will be allowed to invest in these companies. And with more money pouring in, there is huge growth potential.

But, I am unable to analyze these stocks on my own and I do not want to gamble and guess what the stock may do next. So I decided to start investing in a cannabis ETF. My candidate for accumulating in the cannabis industry is AdvisorShares Pure US Cannabis ETF (MSOS).

This ETF is also optionable and therefore I plan on selling strangles around this position.

Our next industry to enter is renewable energy. With the current government policy, the US will be heading towards clean, renewable energy. Thus, I expect growth in the next 4 years (and maybe beyond).

But again, I do not know which stock to pick and which stock would benefit from this trend. Therefore, I will be again investing in an ETF which is specializing in the renewable energy industry.

In 2021, I will be accumulating shares of Global X YieldCo & Renewable Energy Income ETF (YLCO). And the good thing here is, that this stock also pays a nice 3% dividend. Unfortunately, it is not optionable, so I will hold this ETF to participate in renewable energy growth and receive dividends while waiting for the stock appreciation.

Another company in the renewable energy industry I am looking at to accumulate is Brookfield Renewable Corporation (BEPC). Currently, it pays a 1.16 dividend that translates to a 1.94% yield, and the stock is optionable. Our goal in 2021 will be to accumulate 100 shares of each mentioned company or ETF.




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Posted by Martin January 16, 2021
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2021 Week 2 results


The second week of 2021 is over and below are the results of our trading.
 

Account Value: $22,646.49 +$187.81 +0.84%
Options Premiums Received: $678.00
January 2021 Options: $1,910.00
Options Premiums YTD: $1,910.00
Dividends Received: $0.08
January 2021 Dividends: $41.58
Dividends YTD: $41.58
Portfolio Yield: 3.46%
Portfolio Dividend Growth: 6.11%

 

In the second week of January 2021, we have received $678.00 in options credits income. It is a good income for a week. But I have to note that although I am mostly a premium seller I from time to time buy options, for example, LEAPS. When LEAPS are purchased, it will be shown as debit and reduces credits received. It may look like a loss but it is not. I am looking for easy ways to separate these purchases from accounting and include them only after a trade is closed. Since I use data downloaded from my trading account and do not do this manually, I need to figure out how to do it automatically. Doing this manually would not be feasible for me.
 

TW Account Net-Liq
 

TW Account holdings
 

The table above shows our current holdings and gains on those holdings. Adjusted columns indicate how options help to boost (or ruining) our stock holdings appreciation, or in other words, lowering the cost basis. Without options, our holdings would be up 8.05% with options, our holdings are up 10.83% (from inception on 4/1/2019). The SPX is up 31.49% since inception. So our stock holdings do not beat the market. We beat the market thanks to trading options and generating additional income.
 

TW Account holdings YTD
 

TW Options Income week 2
 

TW Options Annual Income week 2
 

TW Received vs Projected Dividends week 2
 

The first week of 2021 started well. Let’s hope, it will continue that way.

I am still raising cash (investing it into the ICSH fund) for rainy days in the stock market. I was also trading less this week and most of the credits went toward cash reserves. The market shows weakness and I want to have enough cash to cover naked trades (making them cash-secured). We are still seeing a Christmas rally momentum but it is weakening and if we look back in history, we may expect up to four corrections a year. I want to be able to survive that correction without forced losses.




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Posted by Martin January 09, 2021
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2021 Week 1 results


I used to post weekly results about my trading. It is a time-consuming effort but my goal is to show other investors and traders who are learning that it can be done. I will strive to keep posting throughout the entire year every week no matter what the results will be. My goal is to show my screw-ups as well as my successes in trading options.
 

Account Value: $22,458.68 +$1,886.33 +9.17%
Options Premiums Received: $1,232.00
January 2021 Options: $1,232.00
Options Premiums YTD: $1,232.00
Dividends Received: $41.50
January 2021 Dividends: $41.50
Dividends YTD: $41.50
Portfolio Yield: 3.36%
Portfolio Dividend Growth: 5.77%

 

In January we have received $1,232.00 in options credits income. It is a good income for a week. But I have to note that although I am mostly a premium seller I from time to time buy options, for example, LEAPS. When LEAPS are purchased, it will be shown as debit and reduces credits received. It may look like a loss but it is not. I am looking for easy ways to separate these purchases from accounting and include them only after a trade is closed. Since I use data downloaded from my trading account and do not do this manually, I need to figure out how to do it automatically. Doing this manually would not be feasible for me.
 

TW Account Net-Liq
 

TW Account holdings
 

The table above shows our current holdings and gains on those holdings. Adjusted columns indicate how options help to boost (or ruining) our stock holdings appreciation, or in other words, lowering the cost basis. Without options, our holdings would be up 8.05% with options, our holdings are up 10.83% (from inception on 4/1/2019). The SPX is up 31.49% since inception. So our stock holdings do not beat the market. We beat the market thanks to trading options and generating additional income.
 

TW Account holdings YTD
 

TW Options Income week 1
 

TW Options Annual Income week 1
 

TW Received vs Projected Dividends week 1
 

The first week of 2021 started well. Let’s hope, it will continue that way.

However, I am now raising cash (investing it into the ICSH fund). The reason behind it is that I am expecting a correction in the market. I do not know when it happens but it will. We have about two to four corrections a year every year. The only exception was 2017 when we had none. If that happens, I want to have cash on hand to survive potential assignments (although I believe I should be able to roll my positions as needed, just in case I won’t be). But most importantly, to be able to buy more shares when they will be on sale when everybody else is panicking.




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Posted by Martin January 04, 2021
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Is investing and trading in the stock market a passive income?


The simple answer is NO, it is not. Investing in the stock market could be considered a passive income, trading is not passive at all.

So, why investing is not a passive income?

Although you may reach the fruits of investing and create a passive income in investing, it is only a small portion of the entire business that can be considered passive. The rest is hard work. Why?

First, if you invest in the growth companies, then there is nothing passive in it. If you invest in dividend stocks, only the final part of your work will be passive. Everything before that – again, hard work.

Just look around in Facebook, MeWe, or other discussion forums and all you find is people asking what to do, how to start investing. They have no clue. But they are willing to learn. And the process of learning, trying, avoiding mistakes, tracking their portfolios, learning about the stocks, learning about dividends, all that is not an easy job. And you will agree with me on that if you try to remember when was the last time you tried to learn something you had absolutely no clue about and many times you wanted to give because it was too complicated.

But if you think that you learned everything, found the perfect stocks, and bought them that your job is over and now you will only have the passive income and nothing else (besides a yacht, helicopter, and ten-bedroom house), you will be disappointed. There is nothing “buy and forget” in the stock market. You can buy stocks, forget them, and one day open your account and find out you have nothing left. Unless you buy index funds and settle with it.

But if you want to own individual stocks, by buying them your job doesn’t end. You need to watch them, read about them, and make sure they still meet your original criteria why you decided to invest in them in the first place. And if you do not know why you invested in them, you should have stayed away from the market too.

None of it looks like an easy job and passive income to me. It still is hard work. But, if you know the ropes, it is fun work.

And trading?

Multiply everything I just said ten times.




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Posted by Martin January 04, 2021
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So, I was waiting for media to tell us what happened today


And sure, the old song has been used to describe the selling in today’s markets:
 

Stock market news live updates: Stocks sink in first session of 2021 as virus concerns, election uncertainty weigh
 

Market Recap: Monday, January 4
Stocks fell Monday in the first session of 2021, as concerns over a post-holiday spike in virus cases compounded with uncertainty over the outcome of the Georgia Senate runoff elections.
 

‘Faltering rollout’ of the COVID-19 vaccine will continue to impact the markets: Sanders Morris Harris CEO
 

Stock Market Today: Stocks Stumble Out of the Blocks to Start 2021
The 2021 trading year got off to an inauspicious start, with the major indices lurching lower Monday amid peaking political uncertainty and continued COVID-related pressures.
 

GLOBAL MARKETS-Stocks drop as virus cases rise; gold rallies
 

Can you see the common trait here? The common message in today’s news? Yes, it is all old news. The markets sold-off today but the media failed to find any reason or catalyst for this selling. So the old song has been used to describe markets shaking the weak hands. Volatility is normal and to be expected. We rallied a lot last two months, a pullback was needed. Typically, if we rally into the close of the year, then, historically, January is bullish too (except in 2019). Who knows what is ahead of us but this is not the big sell off or a market crash bears are calling for the last 10 years.




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Posted by Martin January 03, 2021
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2020 in charts


The 2020 year was an interesting year. It looked like it would be a complete disaster at first, yet it turned around very fast and it became my best year investing so far. Here are some of the achievements in the charts:

 

 · Net-Liquidation Value

 

It was in August 2019 when my $20,000 account tanked to $1,600 after a series of costly mistakes trading 0 DTE SPX Iron Condors. I could manage the trades and grow the account until July. After that, volatility in the market kicked in and I was not able to navigate the trades through it. Losses were piling up fast. It took a month to completely destroy the entire account.

For the rest of the 2019 year, I was sitting tight and thinking about what should I do about this situation. I knew, that I will no longer trade SPX. It was a dead-end and I was trying hard. Yet, the strategy was in front of me for the entire time. Right in front of my nose, advocating it on this blog but ignoring it.
 

2019 TW Net-Liq
 

At the beginning of November 2019, I decided to go back to what I knew best – buying dividend growth stocks and monetizing them. I salvaged what I could and started aggressively buying dividend aristocrats such as PBCT, PPL, and AT&T. And, I started selling strangles around these positions. And the account started going up again.

In March 2020 when Covid hit the markets, the account tanked again. At first, I was depressed and on the brink of completely giving up. But I remember 2008 when everyone was panicking and selling I should have been buying. I was telling myself not to make the same mistake. So, I deposited some cash in the account and started aggressively buying depressed stocks. And as the market started recovering, I was selling puts like crazy.

This action paid off. As the markets continued recovering, my options were mostly expiring worthless for full profit. And I kept reinvesting those profits. Soon I could buy LEAPS against SPY and IWM. And I started selling covered calls against those positions. And reinvesting the profits. And the account continued growing even faster.
 

2020 TW Net-Liq
 

Could this be the end of my trading experiments and continuous growth? I believe so. My trading was a zig-zag move so far and not very encouraging:
 

Overall TW Net-Liq
 

I am pleased with the new strategy and its results. But I will not be as aggressive in 2021 as I was in 2020. I will be building reserves in cash to protect the trades in case I get assigned (the biggest issue is not the options, they have very little to no risk, but the assignment and not having enough cash to cover it). I will also start depositing $1,000 a month to this account and grow it even faster.

 

 · Dividends

 

Prior to 2020, I had no stock positions. I only traded SPX. I might have only a few shares as a result of some bright moment in my wicked trading thinking and bought one or two shares here and there. But in 2020, I started aggressively building my dividend aristocrats portfolio. From the dividend perspective, I am at the beginning of my journey. Note, that I am talking about the business account, not my ROTH or IRA accounts where I was investing primarily into dividend stocks and these have nice dividend income already. But this “business account” is a do-over.

Yet, I collected $2.27 in dividends in 2019 and $178 in 2020. My projected dividends grew from $26.15 in 2019 to $525.43 in 2020.
 

TW Annual Dividends
 

I expect the dividend income to grow as I keep adding more shares to my portfolio. The growth seems high and fast when you look at it but the projected dividend is calculated using the current dividend amount times the existing stock holdings and expected stock holdings or accumulation of the stocks during 2021. I plan on accumulating AT&T, MO, and AFL to reach 100 shares of each company during 2021 (if I get more, the better). If I achieve this goal, my projected dividend will be $1,106.50 in 2021.
 

TW Annual Dividends
 

I also understand that received dividends will be lagging behind the projected dividends as I will be accumulating stocks during the entire year and I may make some purchases after the dividend ex-day, so the projected dividend will increase yet I will miss that dividend payout in the given period. But I will receive it in the very next period.

 

 · Options

 

Options income was tricky in 2020. I collected a nice dividend income but the results are skewed due to a few factors:

1) I still hold a few bad SPX trades. These are included in the current net-liq so they will have no impact on the account value. I do not plan on salvaging those trades unless a good and cheap opportunity presents itself. But if these trades expire (mostly call spreads in the money), they will be recorded as a loss in the options income.

2) I am not only selling premiums but I am also buying LEAPS. When I buy a LEAPS call, it will also show up as options cash outflow and could be considered a loss if you do not know that it was a purchase and not a loss. In 2020 I purchased a few LEAPS against SPY and IWM for almost $5,000 dollars. Thus, in 2020, it seems that I have lost $14,976.91 in options premiums. But it is not correct. I yet have to come up with a good recording method to filter out these purchases. Of course, in the following years, I expect these LEAPS to make a profit and it will show up as income in the next year(s).
 

TW Annual Dividends
 

I hope, this provided a good insight into my 2020 trading and investing efforts. I am happy with the results and I hope, I will continue growing my account in 2021 towards my goal of financial freedom. By 2021 my goal is to reach the $42,344.06 net-liq value of my account. Let’s see, if I will be able to achieve it or even exceed it.
 

Good luck to you and Happy New Year!




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Posted by Martin January 02, 2021
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Starting small


It is hard to start investing and trading when you have a small account and only a few dollars in your account. Unfortunately, a small investor is doomed to take a larger risk than if you have thousands of dollars at your disposal.

Taking a $500 risk on one trade feels different in a $1,000 dollar account than in a $1,000,000 account.

And, you will need double or triple of patience than a large investor. I have seen many small investors, myself included, blowing up their accounts because of being impatient. They wanted to grow their accounts fast, took too much risk, doubled up on trades, and blew it all.

But it can be done.

I personally started trading by buying cheaper stocks. It is appealing to want to trade AAPL but if you do not possess at least $20,000 cash in your account, you can forget it.

I was always into dividend stocks. My philosophy always was that if I would be owning a stock I want to be paid holding it. If you own a good company that pays you a dividend, you get paid in good times as well as in bad times. If the market crashes and all your stocks go south, you still want to receive a check in your mail (well, virtual mail). With growth stock, you do not get this benefit. The growth stock is down and all you can do is to wait empty-handed for it to recover.

But which company is so good that it will pay you even when the markets crash? Not guaranteed, but dividend aristocrats are good candidates to start with.

I went to the dividend aristocrats list and picked People’s United Financial, Inc. (PBCT). It is a dividend aristocrat that has paid and increased dividends continuously for 28 years and it was priced between $10 and $13 a share. The stock is optionable although not as great as more expensive stocks.

First, I started accumulating shares of this stock to gain confidence. Once I accumulated 100 shares, I started selling 50 DTE – 60 DTE covered calls. This takes a lot of patience because you have to wait 50 to 60 days to repeat the process. Many novice investors are not willing to do it. They engage in risky trades for which they do not have enough capital to handle the trade if it turns against them.

You take a credit you have received and buy 1 or 2 shares of another stock. I used PPL. Brokers made it easy today when you pay no commission to buy a single share of any stock. It was not possible just two years ago. When adding more cash into my account, collecting dividends and premiums, I soon could add put options towards my PBCT trades. At first, I went partially naked (I only had 50% saved to cover the put side) but I was selling a partially covered strangle now.

Soon I accumulated enough shares in PPL to repeat the process and started selling covered calls and naked to partially covered puts. I kept saving cash buying an ICSH fund that pays dividends and holds value in volatile times. If I get assigned to any of the stock I just sell the required portion of my ICSH holding to release enough buying power to cover the assignment. But with a single put or call, I do not have to do it. I roll the options. Rolling the single options, unlike spreads, is easy. Many times in 2020 my holdings were on a roller coaster yet I could lower or raise my strangle as needed to avoid assignment.

And cash kept rolling into my account. At first slowly, but soon faster and faster. You need to give your trades and stocks time to grow. Nothing will ever happen overnight. There is no quick rich strategy, no fast profits. Fast profits will come once you accumulate a large enough portfolio so you can afford to take riskier trades.

Don’t rush it. Rushing it will lose you money. If you give it time, you will be surprised how quickly it all turns around and how fast your portfolio will go up despite the initial turtle moves.
 

Cash flow
 




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