, ,

Multiple Streams of Income by Robert Allen

Author: | Date:

Multiple Streams of Income by Robert Allen

Book Review:

A comprehensive consolidation of several ideas and principles for any man on the street to learn to manage their personal finance and grow his wealth. The author is convincing and illustrative with his examples, bringing his ideas across clearly. I like best his foremost emphasis on having the correct attitude towards money – value it. It is indeed the most fundamental skill that we need to have before we should even talk about investing. Personally, I have understood the importance of saving and investing to grow my wealth.

But many times, when I have a considerable sum of money in the bank, I would spend it much more quickly than the time I used to save it! I will only get disappointed with myself and in the future I will do it again. After I read the book, I realized the reason was because I lacked the fundamental skill in valuing money. It became clear to me that if I value money, I would not spend it haphazardly. Thus, I was grateful that I manage to learn the most important thing from the book, more than the value I paid for it. I am also convinced by his advice to set up a dollar cost averaging index fund account, which I am patiently waiting to see the results in 20 years.

As for the section of purchasing a house with nothing down , I am a little more skeptical about it. Maybe I feel the methods proposed are dependent on luck and it seems the actual value of the property is always known. However, we cannot be certain what the price is and how much we can sell for. And even worse, we may even get stuck with the house if we cannot offload it. It is on the risky side in my sense.

The book really has a wealth of information, which is definitely more than what you pay for. He considered all possible avenues of lucrative passive income and packed into 10 main streams for your convenience.

Book Summary:

The 7 essential money skills:

The bottom 3 blocks of the pyramid “form the foundation of all financial success”. “If you don’t value money, you don’t make an effort to control it. If you can’t control it, you won’t be able to save it”. Thus, you must begin with the correct mindset and attitude towards money. “Every dollar bill is a money seed” which has the potential to grow into a money tree and in turn, produce many more dollar bills for you, without you working for them.

To control it, keep a record of your expenses and categorize them (Household, Insurance, etc). A few minutes spent on per money event gives you better control on your expenditures.

There are 2 kinds of ‘save’ – the first is to “pay less for your purchases” (bargains) and the second is to keep aside a sum of money. A wealthy person does both. The initial saving should be reserved for ’emergency funds’ up to 3-6 months of your salary. Thereafter, the extra savings can be used for investment, which further divides into ‘conservative investments’, ‘moderately risky investments’ and ‘very risky investments’. The percentage of your wealth in each category varies with your age (more proportion in conservative when you are older).

Once you have the first 3 money skills, you are ready to make more money from residual income sources. The difference between residual income and linear income is that the former does not require your effort or presence to maintain it once you have set it up, and you get paid over and over again. Linear income would require you to contribute your hours and effort to get paid. To selecting the ideal residual income stream, remember the mnemonics:


  • M – Multiple Streams of Income: This source of income must be able to expand into more streams of income.
  • O – Outstanding: The product/service/information you are selling must be excellent and unique to avoid competition.
  • N – Nothing Down: With upfront capital with as little as possible. Nothing down if possible.
  • E – Employee Resistant: Employees are burdens so the business should be employee free.
  • Y – Yield: High yielding (high profit).
  • T – Trend and Timing: swim with the tide not against it, it is easier to make money.
  • R – Residual: Get paid continuously for a one time effort.
  • E – Essential to Everybody Every Day: More people and more frequently they need it, the more successful.
  • E – Enthusiasm: You must love what you do or sell.

Thus, start thinking of your options and be an entrepreneur to create your residual income streams. The following 10 streams of income have been screened by Robert Allen for you.

First stream of income – Success in the Stock Market: Investing for Total Idiots

Index fund investing would be the simplest and easiest way for any man on the street. It eliminates the need to screen stocks and market timing. The longer your investment horizon, the lower the risk. For the past 10 years, only 20 out of 6000 professionally managed funds were able to beat the S&P500 index after expenses and fees. If you cannot beat the Index, buy the Index Fund! Using the dollar cost averaging method (putting in a fixed sum of money each month regularly), “the sooner you buy, the richer you become” and moreover, you do not need to time the market. However, it is important you continue invest during the bad times so as to take full advantage of this strategy. Expect an average annual return of 10-20%.

Second stream of income – Accelerated Stock Strategies: 6 Ways to Magnify Your Returns

These aggresive strategies can possibly rake in 20-100% returns.

  1. Invest in Berkshire Hathaway (Warren Buffett’s company)
    Join the greatest stock investor of all time and allow him to make money for you.
  2. Select Mutual Fund with the Longest-Term Track Record
    “Excellent short term results may be the clue that you should run for cover”. You can always turn to Morningstar to find the funds that have beaten the market for the past 10 years. To narrow the selection to 1 or 2, firstly look at their expense ratios – with all things equal, the one with the lowest expense ratio would have an edge over the long run. Secondly, with all things equal again, if a fund consistently outperform the others in the same market segment, it probably have an edge in the next 10 years.
  3. Select Only Financial Advisors with the Longest Track Records
    There are plenty of newsletters from advisors giving you promises of astronomical figures returns. To filter the real ones from the fakes, one can refer to Hulbert’s Digest or MoniResearch Newsletter who tracks the performance of these managers.
  4. Let Your Portfolio Goes to the Dogs
    It was a method developed by O’Higgins and more information can be found in their website – http://www.dogofthedows.com/. Basically select 10 highest yielding companies in the Dow Jones Industrial Index. From these 10, select 5 companies with the lowest closing price for that day and buy ther stocks. Repeat the steps in a year’s time. To have a more well-rounded strategy, O’Higgins recommends switching the entire investment into Treasury Bills or zero-coupon bonds at certain circumstances. Check the yield of the bond that is maturing in 10 years and add 0.3% to it. If bond yield is lower than stock yield, buy the 5 stocks. If bond yield is higher than stock yield, the stocks are overpriced and awaiting correction. Check last week gold prices as compared to a year ago. If the earlier is higher, invest 100% in Treasury Bills. If the latter is higher, invest in zero-coupon bonds expiring in 20 years. Hold the investment for a year and repeat the procedure annually.
  5. Consider Enhanced Index Funds
    An enhanced index fund attempts to earn a multiple of what the index tracks. For e.g., Rydex Nova fund aims to achieve 1.5 times return of S&P 500. To achieve the additional profits, the fund engages in overnight options, futures and repurchase agreements. The catch is that at the same time you multiply your winnings, you supercharge your losses as well if it does not turn out well. A mutual fund guru, Bill Donoghue, identified some trends – the American baby boom generation is pouring large sum of money in large cap companies and index funds, driving the prices higher. Thus, if you expects the Index going up further, it would be good to increase your returns with enhanced index funds.
  6. Consider high-Powered Stock Sector Funds
    Sector funds are basically having a portfolio of companies from the same industry (utilities, electronics, telecommunications, etc). Based on the list of hottest mutual fund in a recent 10 year period, several of them are sector funds. Donoghue look at intermediate trends when deciding which sector to invest in. This is because market is very unpredictable day to day and even in a long term bull market, it is down 40% of the time.

Third stream of income – Double Your Money in the Market: How to Multiply Your Investment Dollars

Using one of the high leverage financial derivatives – options. You can sell covered calls on the stocks that you are holding, and according to some experts, the options expire worthless about 80% of the time”. Thus, you have 80% chance of pocketing the premium (option fee) paid to you and at the same time, keep your original stock holdings. You will only lose if the stock price increase tremendously within the option period. The book elaborated on the Cooper Covered Call Strategy which is lengthy to be discussed here. Alternatively, you can buy call options if you do not own the stocks. However, as mentioned above, you only have 20% chance of winning, the screening of stocks have to be more stringent. The effort is worthwhile because you can profit much more than selling covered calls. In addition to the use of Cooper Covered Call Strategy to narrow down the selection, we need extra technical analysis (looking at charts) methods like 50-day moving average and Williams %R Indicator to beef up the strategy. The stock price should be above the 50-day moving average to indicate potential growth. Using the Williams %R Indicator would allow one to identify whether the stock is overbought or oversold. Buy the option when it is oversold, indicated by the graph below the neutral line. Once it satisfied the above criteria, choose the option that is “at the money” – strike price closes to current stock price, at least 3 months to expiry and at least 50 open interest to provide the liquidity. A word of caution from the author: research and paper trading are necessary before you put cash into it.

Fourth stream of income – Winning Big in Real Estate

The principle in real estate investing: “While the vast majority of sellers are inflexible in their prices and terms, a small percentage of sellers are highly motivated to sell.” These “don’t wanters” (motivated sellers) are usually in situations like divorce, loan defaults, financial problems, etc. You are not taking advantage of them, but help them relieve their burden as they no longer need the property. As they only represent a small percentage, you need to find them and there are 9 sources that you can go about it.

  1. Newspapers – a few words/phrases to look out for are “must sell”, “no down”, “take over payments”
  2. Realtors – agents have access to Multiple Listing Service which provide you a good source of the properties for sale
  3. Sphere of influence – Talk to more people that you are looking for a property
  4. Focused wandering around – Look around the area and talk to sellers to check their flexibility.
  5. Banks and lending institutions – Check with banks for properties they want to unload due to foreclosure.
  6. Your own advertising – run classified ads to attract sellers
  7. Country courthouse direct-mail method – Find contacts of potential sellers (e.g. bankruptcies, foreclosures, out-of-state owners etc) and write a letter to them
  8. Investment clubs, apartment associations, exchange groups – Join real estate investment clubs/groups to mingle with like minded investors for opportunities and tips
  9. Other professionals – Notify professionals who are aware of their client’s problems before it becomes public knowledge that you are interested in properties. These professionals can be attorneys, accountants, tax consultants, etc.

Remember to evaluate the property based on these 5 criteria before committing:

  1. Seller motivation
  2. Location
  3. Financing
  4. Condition
  5. Price

Once you found a good property, the next step is to find methods to fund it. Robert’s earlier book, “Nothing Down” have covered more details.

Nothing down technique 1: Ultimate paper out

Sellers have fully own the property (mortgage cleared) and would act as the bank, receiving regular installment from the buyer. The concern of these sellers is that there is a possibility that the buyers would default the loan. The confidence would be even lower if you propose a low or nothing down position. As a buyer, you would need to make the seller feel secure. You can offer them an additional collateral that you are holding (another property, car, etc). You can also suggest buying a term insurance on your life and name the seller as the beneficiary. Or, if the seller does not want the house back when you default the loan, you can offer him other properties that you own instead of the house he is selling.

Nothing down technique 2: The lease/option

When you get a lease option deal, negotiate for an even better deal. Try to lock in the option price at today’s price to get the bargain. Extend the option term as long as possible, at least 2 years. Request that the monthly rent is credited towards the eventual purchase price.

Nothing down technique 3: Anything but cash

Try not to offer cash and substitute with other items or service that you can provide, especially something that the seller needs. For e.g., car, house moving service, consultant service etc.

Nothing down technique 4: Divide and conquer

Find creative ways to raise the downpayment amount. You can assume some of the seller’s debt, garage sale of seller’s unwanted items, credit card, sell part of land to neighbour…

Nothing down technique 5: Other People’s Resources

Find a partner who has the ability to get you the money needed to get the property. Share with him the profits that you are going to make and show him how you go about it. Convince him and you can close the deal.

After you got a great deal, you can now “farm” (harvest) your profit. You can either buy and hold (long term) or flip (short term) the property. Buy and hold would generate cash-flow profit while flipping is about equity profit.

Fifth stream of income – A Fortune in Foreclosures and Flippers


A situation where a person defaults mortgage payment and the lender takes the property back and sell it. The period between loan default to foreclosure varies between 90 to 365 days. There are 4 phases in foreclosure process and each has its pros and cons.

Presale: Before notice of default

Least competition for the deal but also the most difficult to identify, as only the lender and the owner would know about the mispayments. Have to post ads and let them respond.

Presale: after notice of default

It becomes public record once the default notice is filed in the courthouse. Sellers are more flexible as the foreclosure nears. There are foreclosure service companies who prepare and sell lists of default notices. Competition likely.

At foreclosure sale

Not advisable to big for the property at a foreclosure sale as you would have to pay the lender of the mortgage in full, which is a lot of cash.


If there is no successful bid in the foreclosure sale, the lender would take back the property and try to sell it. In this case, the lender would be more flexible as they want to get rid of it, and sometimes, accepts offer lower than mortgage.

Flipping a property

Every buyer would have to sign an option to purchase contract which indicates the settlement price and period. Within the option period, you can find another interested buyer who agrees to buy the property at a higher price and you pocket the difference between what he offered and the settlement price. However, you would have to let him take over the option position. As the option contract is a legal document, you have to make sure you can transfer your position to another person. It will always help when you put in the magic words “and/or assigns” after your name in the contract.

Sixth stream of income – Huge Profits by Paying Other People’s Taxes

Several counties in United States, the local governments who are unable to collect the property tax from property owners, can issue tax lien certificates and sell them to investors to recover the revenue loss. In return for paying the taxes, investors would get the money back plus penalty interest when the property owners paid their taxes. If they refuse to pay, investors can foreclose the properties. You would have to do a check on your state’s practice as different states do it differently and some may not even issue tax lien certificates.

One of the advantages of having tax lien certificates is that they are safely backed by the government. The penalty interest can range from 16% to 50%, which is comparable to the stock market. Further more, tax lien certificates can cost from $10 to over $1 million and thus, you can find a manageable figure to invest in. As Ted Thomas discovered that the 97% of the tax lien certificates are paid off within 2 years. Thus, besides able to benefit from the penalty interest payment, investors have 3% chance to own the properties.

Seventh stream of income – Network Marketing: Ultimate Money Machine

Network marketing has now reached wave three. Marketers no longer purchase products to sell them door to door. They just need to share the advantages of a particular product with potential customers. After they are convinced, they would only need to fill up order forms, and the company will send the products to directly to them.

There are 3 principles to filter out your choice of MLM

Select the right company

Firstly, you need to choose the right products/services. Find one that you are passionate about and it would be easier for you to sell to people. Consider a product/service that your customers would consume and reorder regularly. This would be an advantage because your business can afford to grow with fewer new customers. Secondly, compare the compensation plans offered by the companies. Over 75% of the companies still use a breakaway or stair-step breakaway plan which is related to old style network marketing. Newer compensation methods are unilevel and binary which are used by companies like FreeLife and USANA. To put it simply, choose a plan that pays you more for new customers. Lastly, select a company with a track record of increasing sales and profits for at least 5 years. If the company is publicly traded, look through their financial statements and earning reports to check the health of the company. You should also check for any complains or legal actions filed against the company.

Use the right marketing system

In the book, the author proposed “The 21-day challenge” which mainly targets people that you know, who are highly motivated to earn an extra income. In addition, you can also run classified ads in newspapers to fish out your prospects.

Use the right leadership system

As you recruited more people into your team, you would need to manage them properly. Every week, you should hold training sessions with your key leaders, organise training meetings for new members and recruiting conference calls.

Eighth stream of income – Infopreneuring

Infopreneuring is selling of information which can be a stream of income. There are five rings of riches in infopreneuring. First, you can select a topic that you have expertise in. Next in the second ring, you can teach others about the topic and make sure you offer the teaching in various formats (video, book, seminars, etc). The third ring involves using your specific experience to teach general success skills. For e.g., founder of ONE.99shop, Nanz Chong-Komo, became a business consultant after her failed business experience. Once you start to have a customer base, you are ready for the fourth ring. You in turn sell other products that you have to these customers or collaborate with other businesses, to market their products to your customers and take a commission. You can even rent out your customers’ contacts for a fee. In the fifth ring, you would have become a successful infopreneur, and this can be commercialized too! You can teach other infopreneur how to create a successful business.

Robert Allen introduced the concept of “funnel”. Imagine at the top of a funnel is the least expensive infopreuring service you provide (e.g., book, tape), then as you go deeper, the infopreneuring services become increasingly expensive and intensive (e.g., manuals to live training to interactive coaching). The key is to offer your customers different degree and level of teaching, and try your best to keep your customers progressing down the funnel as long as possible. By the end of the funnel, they would have pay you for all the infopreneuring services you provided and you maximise the single idea that you had created.

There is a seven-step action plan to get you started.

  • Step 1 – Select a subject that matches your passion/expertise
  • Step 2 – Find the hungriest fish in the lake
    Find the people who have been willing to pay for your kind of information. You can rent a mailing list or obtain a copy of Standard Rate and Data Survey from http://www.srds.com/ to do your research.
  • Step 3 – Discover the kind of bait your fish have been biting on
    It is basically market research, to find out your competitors effective strategies. One way to find out is to pretend to be a customer of your competitors and get some sales literature and as much information as possible. Alternatively, talk to your potential customers to find out their preferences.
  • Step 4 – Design your own unique bait
    After the research, create your competitive edge and a unique selling proposition (USP). E.g., Domino’s Pizza USP, “Fresh, hot pizza delivered to your door in 30 minutes or less – guaranteed”.
  • Step 5 – Test your bait
    You will need to do marketing next. Write your classified ad emphasizing the ultimate benefits (not features) and your USP. Using the SRDS, choose an ad publishing avenue with high exposure to your potential customers.
  • Step 6 – Roll out your marketing campaign in a major way
    Once your bait has proven successful, run as many ads in different avenues as possible. Upgrade the size of your ads along the way too.
  • Step 7 – Add other ring 2 versions of winning info-product
    When your you have a successful product, look into ring 2 riches, see what other versions you can sell the same information.

Ninth stream of income – Licensing: Intellectual property at warp speed

Here is a five-step plan for licensing.

  • Step 1 – Saturate your mind with tollgate thinking
    Spend time thinking how you can be a tollgate which everyone who passes through has to pay you a fee. E.g., Bill Gates is the tollgate to the PC world where everyone who needs an operating system from microsoft, would have to pay him.
  • Step 2 – Pretend you’re a licensing mogul
    Everyday, try to notice at least one licensing possibility and spot any promising idea or concept.
  • Step 3 – Spend a day at the local library or bookstore
    Licensing guru, Ken Kerr, took up the challenge of signing a profitable licensing deal within 72 hours in a strange city. He went to the main branch of the local library and look through filed patents. He shortlisted high potential patents and thereafter, contatcted the inventors. He picked the best choice and signed an agreement for worldwide licensing rights.
  • Step 4 – Find a manufacturer or end licensee
    After you get acquired the licensing rights, look through the American Registry of Manufacturers, to find a suitable manufacturer who would be interested in a licensing agreement. Thus, you can utilise the manufacturer’s capital, inventory and even distribution channels.
  • Step 5 – Enjoy lifetime streams of royalty checks
    Keep your mind open about licensing as you would not know when the opportunity would come.

Tenth stream of income – The Internet: Your next fortune is only a click away

Strategizing your launch

Find a product that can attract the masses rather than a specific group of people as it will be easier to make the sales. There are 3 web business models that you can adopt. The first 2 are what you have learned from the previous streams of income – network marketing and infopreneuring. Apply what you have learned and use the internet to further improve your business. The third is affiliate programs where you get a referral fee from your supplier when you help him sell a product through your website. One thing to note is to make sure the affiliate program complements the content of your website.

Automating everything

Observe your visitors through web stats programs. Valuable information like what they browsed and bought; the time they came and left; the duration they stayed; are clues to advertisers whether their advertisement will work on your site. In addition, you should have automatic e-mail templates and autoresponders. This helps to create the “getting them while they are hot” effect. With e-mail templates, you can easily send marketing information to as many people as possible, and increase your sale chances.

Marketing to build traffic

Marketing is the key to internet success. Here is a eight-step plan to increase traffic:

  1. Use your email and website address in all of your real-world advertising – affix your email and website in business cards, letterheads, fax sheets, flyers, etc
  2. Register your website everywhere – register your website with as many search engine as possible
  3. Join and post messages with newsgroups – Read messages posted in newsgroups and when you post messages, remember to leave your contact and email address
  4. Rent email lists – rent a list of contacts where you can market your website to through emails
  5. Take advantage of free advertising – post advertisements wherever it is free
  6. Use free links, link swaps, banner exchanges, cross promotions – swap links with other websites, especially those of high traffic. To go a step further, write endorsement letters for each other’s products to improve credibility.
  7. Make use of paid advertising online – Target your advertisements at sites where your customers are visiting
  8. Use traditional offline direct-marketing techniques to drive customers online – there may be potential customers who would not normally find you online, so use direct mail methods to attract such people

In the last few chapters, the author went through tax planning and charity foundation.

Summary map of the book (click to enlarge):

5 thoughts on “Multiple Streams of Income by Robert Allen”

  1. Just counted and realise that now I have in total, 11 Sources of Income…and I am financially free in every sense of the word, since some of these sources are Passive Income and will continue whether I continue to work or not.

  2. Hi Alvin, i noticed this author has another book called “Multiple Streams of Internet Income”. Do you have any comment for that book?

  3. Alvin,

    As you have read Robert Allen’s book, will you be interested to be mentored by him, and learned from him?

    Btw, he is coming to Singapore this Aug 2013, will you like to attend his seminar and meetup personally with him?

    Let me know.


Leave a Comment