Money For Nothing: And Your Stocks for FREE – Book Review

I was at my local library doing my regular walk through of the personal finance section and the new Derek Foster book, Money for Nothing, caught my eye.  As I was a fan of his previous books, I anticipated great things from this edition, so I quickly checked it out to be read later that evening.

About the Author

For those of you who are unfamiliar with Mr. Foster, he is the self proclaimed Canada’s Youngest Retiree.  He is the author of 3 books, 2 of which I have reviewed already, Stop Working! Here’s How You Can along with The Lazy Investor.  As you can see from my recommended book list, stop working is among my favorite personal finance books.

About the Book

Derek Foster’s newest book, Money for Nothing: And Your Stocks for Free covers a diversity of topics, but the main theme being to sell put options to generate cash flow.  For those of you unfamiliar with options, here is a primer on how options work.   When you buy a put option of an underlying security/stock, it gives you the “option” to sell the security for a specified “strike” price.  Of course, for the privilege of selling your security/stock at the specified price, you’ll have to pay an option premium.

On the other side of the coin, if you sell a put option at a chosen strike price to an put option buyer, you collect the option premium and only have to buy the underlying stock if the option is exercised (most likely when the stock price goes below the strike price).

Money for Nothing emphasizes the strategy to sell put options on strong dividend paying stocks at a strike prices that are attractive.  That is, the strike price where you would consider buying the stock anyways and collect the option premium.  The key is to have enough cash in your account to cover the stock purchase should the option be exercised.

Along with explaining a put option strategy, Derek Foster also dives into explaining the pros and cons of leveraged investing.  He gets into his personal story of using massive amounts of leverage to buy Philip Morris which, lucky for him, turned out in his favor.

Out of the three books, I enjoyed Stop Working: Here’s How You Can the most, but this one does provide a few new ideas that I will be looking into deeper.

Have you read this book yet?  What are your thoughts?

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FT

FT is the founder and editor of Million Dollar Journey (est. 2006). Through various financial strategies outlined on this site, he grew his net worth from $200,000 in 2006 to $1,000,000 by 2014. You can read more about him here.
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Banker
9 years ago

My question is that if you do his money for nothing strategy, and write a put on a stock you are looking to buy, what happens if the stock continues to go up.
He seems to be writing puts that are a year to expiry which means if the stock does go up he would never be able to buy the stock although he would have a nice fat premium in his pocket.

Any thoughts on this?
I do like his ideas on leveraging although this is nothing new. I also feel that he is not fully explaining the risk involved in writing naked puts.

Marco
9 years ago

The bottom line: He is financially independent. Are you? Isn’t that what we are all trying to accomplish? He gets to do what he wants, when he wants, where he wants, how he wants and with whom he wants. He could have kept all of this info to himself. He chose to share it to everyone. I’ll gladly listen to his financial advice any day.

Ross
10 years ago

I just read it, and liked it, for a couple reasons. Firstly, you make money for nothing, or simply writing the put, as he says, and secondly you get to buy the stock at a cheaper price…maybe.

I am not understanding why some people are posting bad comments about this strategy. You go to walmart and buy things on the shelf for the asking price, what if they paid you to say you would buy the item you wanted at 25% OFF. Makes a lot of sense to take that money, and if they want to sell it to you at a discount BUY IT!

As someone said its a simple strategy, why do people think it has to be more complicated than that? K.I.S.S

Anyway, I’m gonna give this a try. Can’t hurt to get paid to buy what you want at a discount :)

“money cant buy you happiness, but give me a chance to prove that wrong”

G Money
11 years ago

Wow! Tough crowd on Foster. Unfairly in my opinion.

I’ve read books by Warren Buffet, Peter Lynch (ex-Fidelity), David Chilton (Wealthy Barber, etc), etc. etc. etc. You know them all, I know. They were all outstanding books and I learned great lessons from each, that I do try to apply to my financial planning / investment strategies. Foster’s right up there with these guys in my opinion. I gotta say that Derek Foster really opened my eyes to enhanced possibilities through his 2 original books and got me started on a real retirement plan (I am hopeful to be in semi-retirement within a few years in early 40’s). Like everything else in life you have to filter the message and absorb what works for you in your personal situation.

I really enjoyed his book ‘Money For Nothin’. Although I have not moved $500K into cash to execute the selling put options strategy, I can see how adding this kind of strategy as a compliment to my current plan could work under the right circumstances.

Dividend Growth Investor
11 years ago

I wonder what the title of the next book is going to be? How to survive in a homeless shelter?

cannon_fodder
11 years ago

Perhaps one should give him credit for being a good self-promoter rather than a shrewd investor.

Canadian Finance
11 years ago

I haven’t looked too deep into options, but I take issue with the title of his book… makes it sound easy and risk free.

longtimereader
11 years ago

okay you guys are a bit harsh to the Foster. I enjoy reading his first book and wish him the best . He adjusted his investing strategies that’s it , as a dividend growth beliver I guess only time will tell …

Penny Pincher
11 years ago

Whether it works or not, ethically, I have a big issue with Foster’s overall approach to what he calls “Money for Nothing”. Part of his original dividend strategy was based on earning just enough to get by while relying on the government to subsidize him as a low income family so he and his wife don’t have to work. In other words, this is a guy who is able to work and yet he’s actively promoting living off the system. Mind you his income from writing books now means he no longer qualifies as a low income family but I still find it really distasteful that he promotes this.

Mark Wolfinger
11 years ago

1) Foster’s idea on put writing are not ‘wrong’ but they are simplistic. If you truly want to buy stocks (and the inherent risk that comes with stock ownership) then writing out of the money puts is a viable strategy.

2) Recent times, and the volatile markets, suggest more conservative strategies. That means selling puts (and/or calls) but also buying protection to limit losses. That protection is a less expense put and/or call.

3) Yes Preet, iron condors are the bulk of my trading. Intro to topic here: http://blog.mdwoptions.com/options_for_rookies/2008/06/recommended-o-3.html