Are You Overlooking This Critical Source of Investing Returns?

If you've spent much time on the Great Option Trading Strategies website, or even hanging around me personally, then you know how I can - and do - go on and on about using options to acquire shares of high quality businesses at steep discounts.

(I'm not talking about 1 or 2 percent - I'm basically talking about naming your own discount.)

Believe me, my 10 year old will either grow up to be the world's greatest investor, or he'll be so sick of our frequent investing conversations by the time he's 18, he'll renounce the material world and join a monastery.

(I'm not too worried though - I'm pretty sure the monks would make him give up video games, too, before allowing him to move in . . . especially the ones he wants to play.)

It's Not Just the Discount on the Stock

A lot of the focus gets placed on the discount part of the equation, and understandably so.

But I think what a lot of individuals don't fully appreciate is the power of owning high quality companies in the first place.

Trading-only returns - even when successfully employed - are often quite linear.

They're one time events.

Your trade produced X percent returns.

You did the work, found the opportunity, handled the set up, monitored and managed the trade, and then at some point it was closed for a profit.

Congratulations on achieving your one-time profit - now go out and do it again.

The Power of Real Investing Over Time

When you own a world class business, the repetition comes from the operations of the business, not from you.

It comes from loyal customers opening another can of Coca-Cola or box of Cheerios or bottle of Head 'n Shoulders or container of Yoplait yogurt or pulling into - yet again - the drive-thru of a McDonald's or Starbucks.

And, over time, the earnings of world class businesses aren't just consistent and repetitive - they're also growing.

I say this a lot, too - when you own high quality businesses along the lines of the dividend growth model (a company earns more each year so it pays out more each year) your returns take on three powerful qualities.

• They're continuous.
• They're increasing.
• They're automatic.

The Fear of Owning Stocks

But somehow over the last ten or fifteen years the idea of ownership itself has taken a hit.

Maybe because we've seen too many times the bottom fall out things that can be owned, such as real estate or the stock market.

But sometimes you seriously need to take a step back and regain some perspective.

Because those great, world class businesses?

They're earning (and paying out) more today than they were five years ago.

And . . . OK - I think you get the idea.

Ownership isn't incidental or a mere by-product to building wealth - it's the primary requirement.

Once you fully recognize that, the next two questions to ask are, what should you own, and how can you get the best deal on it?

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