Small 401(k) Loan Finances a Big Opportunity

As I hinted the other day, you can use your 401(k) to finance a low-risk opportunity venturing to make a fortune when the time is right. Your aim is to radically improve your life in the here-and-now risking very little money.

Starting with just $500 (and risking no more than this) you automatically limit your loss. Look, no matter who you are, $500 these days is nothing (relatively speaking). So, then, since $500 is such a small amount, this, by default, minimizes your risk. That's what makes the investment opportunity I will be discussing here foremost a "low-risk" proposition.

As you know, the first thing you should consider before making any investment — the first thing you really must wrap your brain around — is how much do you risk losing if your investment sours. So, here, you know your risk is $500.

Where you will venture this risk is in a place where relatively few people go. Don't let this discourage you, though. The marketplace where $500 can be quickly multiplied into tens of thousands of dollars is all very legal and above board. In fact, over the past thirty years regulated exchanges where options trade have increasingly moved into the mainstream of investing.

Before I go any further, let me just say stock index options — securities I have extensive experience trading — can have a rightful place in any safety-minded investor's ammunition belt. Surely, though, the prospect of speculating using stock index options more likely will be appropriate for those who are empowered by my simple 401(k) investment strategy. These folks realize that, their desire to safely secure superior investment returns requires gaining some useful ability to better distinguish risk and opportunity investing their 401(k) in stocks.

Truth be told, it is possible to apply this power of discernment even to those relatively infrequent instances when volatility in the stock market is likely to explode for an extended period. These are moments when risk of loss trading stock index options is markedly lower than is normally the case. More provocatively, though, this is when your opportunity to turn $500 into an extraordinary 5- or 6-figure score astronomically increases.

Speculating with stock index options is most appropriate when there's heightened volatility in the stock market. Now as history would have it, rising volatility typically is associated with periods when stocks are falling. In such times (were you employing my simple, two-step, 401(k) investment strategy) your nest egg already would be parked in a safe money market fund, well-protected from the ravages of a declining stock market, yet earning squat just the same.

So, the question is why not borrow $500 from your 401(k) to finance a stock index options play?

When you pay back a 401(k) loan (principal plus interest) you, in fact, pay yourself the interest. That's how a 401(k) loan works. Now, chances are this interest you are paying yourself is going to be greater than what you are earning in your 401(k)'s money market fund. So, here is a case when borrowing from your 401(k) can even make good financial sense!

Realistically, though, were this to be true, then not only must you not lose your 401(k) loan's principal ($500), you also must earn more than you are paying [yourself] in interest. Your odds of achieving this objective can be significantly improved when you trade stock index options only when stock market volatility is elevated. Insist on waiting for this. Sure, your opportunity to make a quick killing will be most ripe then. But more importantly, your ability to go for the gold without risking a dime of your own money will be vastly improved when you wait for increased volatility in the stock market.

Patience truly is a virtue here because, even though you are aiming to capture huge profits trading stock index options, your first priority, as always, is safety. In fact, what starts as a low-risk proposition should initially venture to have you quickly banking a profit, so you can take your $500 stake off the table and play with "the house's money" thereafter (making your risk zero from there on out).

Now, you can believe opportunities promising incredible gains (in a mere matter of days or weeks!) speculating with stock index options do not appear even every year. Yet in historic times like these, occasions offering extraordinary opportunities to earn a fortune risking very little money are sure to appear. There should be several instances over the next five years when volatility in the stock market raises opportunity to multiply a measly $500 into tens of thousands of dollars, if not much, much more.

Truly, I have little desire to hype possibilities here. I much prefer being realistic. Still, reality has it that, moments of heightened volatility in the stock market are as natural as tornadoes in Kansas, and all the more likely over the next five years.

So, stay on guard, because there are extraordinary risks threatening to decimate your 401(k). Have no doubt, though, you can easily sidestep any danger. Not only that, but in fast approaching times of trouble you can turn your life around in a big, big way risking so very little.

Are you IN?