THE EAST-WEST INVESTMENT TECHNIQUE

The most certain way to protect your principal in the stock market is to invest only with the interest it earns. Too often investors attempt overnight riches, failing to realize that it is not the killing which makes for market success, but rather the compounding effects that a consistent investment strategy provides over a period of years. Windfall profits mean nothing unless they are maintained and maximized. Thus, applying conservative banking principles, speculating only with interest earned by one's investment program, in the long run yields an improved return on capital in a consistent fashion.

Many investors aim of a 50% to 100% return per year on their investments. That is, for most, too high. In reality a 10 to 20 percent return per year on capital is sufficient to compound even small amounts of money into a plump nest egg over the course of a decade as seen from the following table:

Ten years compoound gain:
At an annual percent gain of
$10,000 grows to
0%
$10,000
10%
$25,937
20%
$61,917
30%
$137,858
40%
$289,255
50%
$576,650
60%
$1,099,512
70%
$2,015,994
80%
$3,570,047
90%
$6,131,066
100%
$10,240,000

Building the East -West Pool

The formula for speculating with interest is the basic procedures on which the super fortunes amassed in this country have been and enhanced. The simple reason the rich get richer is that they can speculate with their interest income. Her's how you can use the same approach.

First of all, one must build a pool of capital consisting of ultraconservative investments. this pool of capital, which is called the East pool, should be invested in bond funds, blue chip equity funds, and money market funds. These conservative media give investors both strong basic capital and sufficient income to keep positioned to make large returns on their more aggressive investments, while keeping their principal intact.

The purpose of the West Pool is to use the interest earned on principal in such a way that one-dollar does the work of ten to twenty. The selection of mutual funds to be used in the West Pool must, therefore, be made with particular discrimination. First of all, West Pool investments must be oriented toward high leverage. While the reason for investing in the East pool was to generate and assure a conservative return, in the West Pool investments are made ultra-aggressively, in high risk mutual funds such as gold funds to achieve capital gains and hedge against inflation.