How To Make A Small Fortune

Jim Woods

Jim Woods has over 20 years of experience in the markets from working as a stockbroker, financial journalist, and money manager.

Do you know how to make a small fortune in auto racing?

You start with a big fortune. 

This apropos adage is certainly one that amateur, semi-pro and even professional auto racing team owners discover very quickly, and that’s because when it comes to a costly venture, few things add up as fast as motorsports.

Now, the reason this subject is forefront in my mind today is because over the weekend, I attended my favorite event of the year, the Long Beach Grand Prix. This year’s event was particularly special for me, because the 2020 race was canceled due to the pandemic. 

Then the 2021 event was supposed to take place in April, but it was postponed five months, also due to the pandemic. So, after a wait of about 17 months since the 2019 race, I finally got to be up close and personal with some of the greatest drivers, teams and motorsports technology in the world. They combined to provide thrilling moments not just for me but for fans around the globe. 

Interestingly, my friend who attended the race weekend with me made an astute observation that sparked the idea for this week’s issue. Here’s what he told me:

“Jim, the racing business sort of seems like what you do. The team owners pour money into their people and products in pursuit of victory. And when it comes to investing, we put money into companies in pursuit of winning by growing our money.”

I thought about this observation for a few minutes, and then I came to the conclusion that my friend was partially on track (pun intended). You see, in some ways auto racing is similar to investing, but in other ways, it’s very far from it. Let me explain.

Like auto racing, investors want to win. And like auto racing, investors have to take risks to come out with a victory. If you want to win the Long Beach Grand Prix, you can’t just safely negotiate the 1.968 mile, 11-turn road course. Instead, you have to push, push, push all the way through, and you have to do each lap in about 70 seconds (the track record is 1:07.5511, set by Josef Newgarden in 2018).

And if you want to win in your portfolio, sometimes you have to push things along by buying high-momentum stocks and out-of-the-money call options on those stocks in pursuit of really fast gains, like the way we do in my Bullseye Stock Trader advisory service. 

Your editor standing near track record holder Joseph Newgarden before the 2021 race. 

Yet unlike auto racing, when we put our money into a company, our winning comes in the form of more money. 

You see, in auto racing, and particularly in the amateur and semi-pro ranks, but also largely in the professional ranks, the money you put into the venture doesn’t come back to you multiplied the way a good investment does. Sure, you might win a trophy, and it might be really fun, exhilarating and satisfying, but it’s going to cost you a whole lot of capital.

But when we invest, the trophy is the increased capital, and the bigger the gains, the bigger the trophy. So, unlike a pursuit that costs you money, investing is a pursuit that, when done properly, is going to make you a whole lot of money.

Another way to frame this for contrast is that unlike auto racing, investing doesn’t take a big fortune to make a small fortune. Instead, when you invest, you can take that small fortune and turn it into a really big fortune.

And when it comes to investing, there’s no time like the present to go out on the track and test your driving skills. 

So, ladies and gentlemen… start your engines!

***************************************************************

Jonesing For Control 

“If you’re in control, you’re not going fast enough.”

— Parnelli Jones

Indianapolis 500 winner, team owner and racing legend Parnelli Jones knew that to really push the envelope, you have to be just a little bit out of control. This is a profound lesson in life, because if you want to break free of the ordinary, you often have to intentionally get a little bit out of control and attempt the extraordinary. Remember this the next time you do anything. 

Wisdom about money, investing and life can be found anywhere. If you have a good quote that you’d like me to share with your fellow readers, send it to me, along with any comments, questions and suggestions you have about my newsletters, seminars or anything else. Click here to ask Jim.

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This article is the second in a series exploring equal-weight ETFs. The market uncertainty and volatility can cause concern among investors, but they may want to turn to equal-weight exchange-traded funds (ETFs).  The benefit of an equal-weighted ETF, such as First Trust Nasdaq-100 Equal Weighted Index Fund (NASDAQGM: QQEW), is

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