Investment Articles

At one point in our lives, we may have encountered or heard the word broker. In the past, there was a little tinge in its definition and how people look at their nature of work. At a certain point, the word “broker” was likened to individuals who take advantage on the opportunities to make money from certain individuals or companies. Today, however, people are much more open to the idea and are starting to accept the importance of what brokers do and their importance in making business or personal decisions. Brokerage definition has come a long way from what it is known in the past to what it is and how they are used as an advantage in how people do business now.

What is brokerage?

Simply put, a brokerage is a firm or group of individuals who works an intermediary between sellers and purchasers. They do not own the products or services being traded, instead, they are merely an “instrument” that facilitates the deals and takes on any paper works and other matters in between so that a business closure can be achieved. Brokerage is most likely referred to as a brokerage firm, which has the capacity to handle and intermediate all types of deals.

Brokerage Fees

According to the widely accepted brokerage definition, brokers prepare and complete all the necessary paper works needed to close out the deal. They obtain signatures from both the sellers and buyers and they even collect the money from the buyer and hands them over to the seller.

The broker will then be paid for his services in 3 different ways:

The broker may collect a portion of the money that was paid by the buyer to the seller.

A broker may charge both the seller and the buyer for a service charge.

A broker will earn commission based on the amount of sale from the seller.

The fee may also vary depending on the extent of work or service offered by the broker. In some cases, the broker is given the full responsibility by the business owner to decide and perform everything for the company. In this case, he or she is paid by a huge amount and gets paid regardless if the company is making money or losing some.

Types of Brokers

Here are some of the types of brokers and basic definition on what they do.

Employment brokers – these are individuals or a firm that links a person that is looking for a job to companies who are actually looking for the specific work or skills he offers. In the vague term of the word, employment agencies can be considered as employment brokers due to their nature of work.

Merchandise Brokers – These are people who facilitate movement of stocks and supplies between manufacturers and producers of raw materials. At times, brokers also offer a link between two manufacturers who are working together to come out with a product.

Insurance Brokers – Insurance in itself can be very intimidating and hard to understand. Looking for a company that best suits your needs could be lengthy and takes too much research on your part. Insurance brokers come equipped with all the knowledge about the industry and the fact that they have multiple contacts from different insurance companies, make them valuable assets in finding the right insurance for you. They could also facilitate fast release of funding should there be a need for insurance claims.

Real Estate Brokers – handles everything in the real estate field from buying or selling of houses, businesses or buildings. A broker has a ready list of available houses or establishments that a buyer can seek rather than going around town and reading newspaper ads in looking for one. With brokers facilitating the sale of a certain property, it will only be in a matter of time before buyers move in to their dream houses.

Loan Brokers – these type of brokers work closely with banks and lending institutions. Individuals who are looking to secure a loan whether for business purposes or other financial expenditures will need to prove to the bank or lending institutions that they are legit and qualified to get a loan. A loan broker sees to it that the borrower will have the needed papers as well as capacity to pay, and then looks for a lender that caters to the specific needs of the client.

Ship Brokers – if you ever find the need to ship containers and cargoes, these shipbrokers keeps you updated with the movement of ships from almost any port in the world. They have control on the cargo space available as well as rates for shipment. This information is then given to shippers to decide whether to push through with the shipment or not.

Stock Exchange Brokers – deals with the stock market and the buying and selling of stocks. They either work for an individual or company active on the stock market exchange. Their functions ranges from being a floor broker who performs the actual buying and selling on the trading floor working on what the owner wants them to do, or they could work as a all out brokers where they are given the responsibility of taking the business in their hands,

The brokerage definition as well as its nature of work has significantly changed now that most individuals have access to the Internet where they can gather information freely. There are even sites where people can trade in stock market or foreign exchange markets online by themselves without the need for actual brokers. Most companies like insurance or banks have also tapped into the online world enabling individuals to secure loans and insurance right off the Internet.

Whatever the case may be, brokerage definition will continue to evolve and will help reshape the brokerage world. As of today, millions of brokers have maximized the use of the Internet to their advantage rather than disadvantage. Today, more than ever, they have the capacity to do better in their field of work and further give enhanced assistance to those who need their services.

I provide an online informational resource on a wide variety of today’s top brokerage careers, such as Stock Broker Training, Customs Broker Training, Insurance Broker Training and many more.

- Giovanni Pugliese

How to Generate Passive Income

Most people agree that the key to success is diligence. They are afraid to get behind the race. These proactive people have proven to become stable in their life. On the other hand, the lazy don’t have any problem simply because they don’t have anything as well. Both types of people have chosen to be so. It sounds fair, doesn’t it?

However, this equilibrium is the thing of the past. If this is our mindset, we will surely be surprised at the great fortune of those who have exerted less effort and at the frustration of those who have done their best. It doesn’t mean that life is unfair. In fact, we earn not only from what we do but also from what we don’t do. The former is known as active income; the latter, passive.

Active income is an income we generate from our hard work. When we work for money, it is active income. But, when it is our own money that works for us, it is passive income. Passive income is an income we generate from our investment. How to generate passive income without active intervention is not a kind of magic that everyone could have.

How to generate passive income? Passive income is generated when our investment earns because of our timely decision. In this type of income, we are paid for the decision we make and for the risk we take. When we become afraid of investing, we tend not to make any decision. Consequently, nothing happens to our money. To generate passive income, we should make the right decision on what and when to invest and not decide about not investing. We must also calculate the risk – the higher the risk, the higher the return. The lower the risk means the longer it takes to get the potential return. It depends on who we are and what investment fits our personality. Proactive people are naturally career oriented so they can successfully generate active income. On the other hand, patient people are wise decision makers and risk takers.

Now, the question is which type of earners we should be. Active earners have full control of how much they could earn, but there is limit in the amount as there is limit in their energy and time. When they stop, so does their income. However, passive earners are more efficient in the sense that they enjoy the unlimited potential of earning high with less energy. Moreover, passive earners can be both active and passive earners. Apparently, passive income is more advantageous.

It is not difficult to know how to generate passive income. There is a lot of available information around us that can help us learn to begin this with. We generally have heard about investing and among the popular are stock market, bonds, mutual funds, insurance, pension plans, and treasury notes. Before investing, it is important to study your choice investment. We don’t have to be the jack of all trades. What is important is that we understand the risk and the potential of the market we want to enter and start small just for a try. As time goes by, we will gain experience and will master the market we have chosen. In the advent of technology, it has become easier to get more information about any field of endeavor. The internet offers numerous tools we need to become equipped.

The most crucial part of how to generate passive income is our attitude toward investment. Some people think that investment is done in order to sustain our daily need and this is a wrong notion. If so, it is not any more investment. It is livelihood. Our immediate need can only be sustained by active income. To depend on investment for daily needs is irresponsible. We should work in order to live and we invest because we secure our tomorrow. Real investors are future oriented. They don’t exactly make money right away. But their money makes them. That is the reason why we call this condition passive. Everybody’s need today is different from our need in the future. Our immediate need is answered by our immediate action and immediate results make us grow. But passive income is not something that should make us grow. This is something that we should grow. So, whatever we earn now is what we need now. Active income is the reflection of we do now. The right attitude toward passive income is to treat it as a separate living entity. Active income is what we need now. And passive income is what our investment need now. It is like a pet that we should raise.

What about business? Is it a kind of active income or passive? Actually, it is the combination of both. A businessman actively controls his cash flows to sustain his daily needs and at the same time spare some bigger portion for his business as a separate entity. However, businesses are complex nowadays depending on their size. Large corporations are mostly owned by a number of people called stockholders. They hire managers and even CEO’s to actively control their operations. Sometimes, they intervene in a macro level. But their control and effort are limited compared to the significant income they get every year if their companies continuously grow.

For these people, these large companies are their source of passive income. For small businessmen, they must exert all their effort for their business. They have trouble making their businesses grow because they also depend on the active income they generate from operating their businesses. Would this mean that in order to generate passive income, we should have had large capital to invest? Not necessarily! We can do so by investing in shares of stocks even in smaller amount of money. This is also true with mutual funds that pool individual investments in small amount to make it one big investment. This means that we generate passive income like big investors.

In a nutshell, we need to learn how to generate passive income while maintaining our active income so as not to compromise the balance between these two types of benefits. How to generate passive income is to keep our active income.

Michael F. Anyayahan is a freelance forex trader and writer. To learn more, visit: http://www.forexuniverse.yolasite.com

As recently as 2006 it was commonly heard that real estate was the safest investment you could make. But even in 2006, there were some people, known as “insiders” who were actively investing in movies. They knew about the profits others were making with real estate, yet they kept investing in movies. Logic says there had to be some reason for them to keep doing this. This article will explain why some intelligent and knowledgeable people are enamored with investing in movies.

It is as easy to make a movie and market it, as it is to make an apartment building and market it. It just involves two different types of know how. To build a rental unit, different experts are hired for the various aspects of the building, such as carpenters, electricians, plumbers, and so on. An investor does not need to know how to do any of the actual jobs, the investor just needs to know how to coordinate everyone, as well as get the building permit, and apply for zoning changes if needed and so on. The investor can hire a contractor who then hires the various tradespeople, instead of doing it themselves. To make a movie, an investor can hire a contractor, known as a producer, to hire the cast and crew and coordinate everything.

The rental life of an apartment can usually be expected to be about 50 to 60 years. It can be more, and it can be less, with factors such as rot and termites to be considered. During this time, a lot of effort is involved in the management of the property, by way of maintenance and insurance for example.

Movies can have a revenue life of 60 years or more as well. And once made, there is no maintenance. Humphrey Bogart is still making money for someone! You can verify this by checking your TV movie listings, and you will see that many movies made 20 to 30 years ago, are still very popular, and they are shown repeatedly on TV.

For the same investment, a movie can make up to a thousand times as much as a rental property. This is especially true for low budget movies. With a digital camera, a home computer, and unknown actors, a quality movie can now be made for only $200,000 to $300,000. There have been movies made for under $30,000 which have made 100 million dollars. It takes research to find a promising movie project to invest in, the same way it takes research to find the land in the right area on which to build a successful rental unit. There are movie investor “insiders” who are happy to perpetuate the myth that movies are very risky, because they want to keep others away from what they know is a very lucrative industry to invest in. And compared to apartments, movies are a lot more fun!

I am making a low budget movie. On my site, I have an article which conclusively proves that movies beat real estate. The article was not written by me, it was actually written by a real estate expert. You can read the article through the link below. You can then go to other parts of my site and learn all the details, including how it can be made for only $145,000. I am seeking investors with $10,000 up. http://www.samandleah.com/realestate.htm

The site is very complete, with nothing hidden. In my life I have been told that I am too honest, but it’s the only way I want to be.

There is a difference between being afraid to invest and be cautious. When you are considering whether or not to buy stocks, invest in ETFs or purchase mutual funds for your financial future being afraid to act does nothing but insure that you will not be successful.

Being cautious with your investments is totally different from being afraid. Caution should be part of every investment decision. But there are precise ways to exercise caution so you can be successful with your investments and grow your money.

Growing your money is what investing in the stock market is all about. If you grow your money you accomplish many key factors including:

• Less stress because your portfolio or checkboo9k is expanding
• Comfort in knowing you will have enough money to live in retirement
• Comfort in knowing you have a financial cushion if it is ever needed.
• Knowledge you can dream about big purchases or trips and they can become a reality.

So how do you invest cautiously yet with confidence and knowledge that your money will grow? A few simple premises:

• Pick a proven method of analysis to guide you in your evaluations.
• Pick a software program that enables you to invest to meet your objectives.
• Pick a software program where help from a real human being is just a quick phone call or email away.
• Back test your investment strategies or ideas to make sure they are most likely to see going down the road.
• Pick a software program that makes reading charts clear and easy.
• Pick a software program that goes beyond charts and evaluates your stocks, mutual funds or ETFs on other factors, especially in comparison to the general market and other stocks, ETFs or funds.
• Use a software program that tells you when to get out of the market and preserve your money.

If you follow these principles the fear of investing, the fear of losing, will be diminished. Will it go away completely? No. We are all human and all afraid of losing but if you invest with caution and base your decisions on solid recommendations your likelihood for success jumps dramatically.

Will you ever lose in the stock market? Yes. Not every decision, even with the best of analysis is going to turn out right. But remember that a successful baseball play is one who bats over 300 which means he gets a hit one out of three times. A successful quarterback never throws each pass for completion, just the majority. On the other hand if you can score a gain on 60% or 80% of your investments while keeping those losing choices to a bare minimum your portfolio, your checkbook is going to see substantial growth.

You can see substantial investment success if you follow these key principles.

Author Raymond Dominick is the designer of Dynamic Investor Pro investment software for stocks, ETFs and mutual funds. He has been investing in the markets since his teenage years. An experienced business manager and journalist, he has been a registered investment advisor representative, also a professional photographer who loves escaping to the wonders of Glacier National Park in Montana.

View his software at: http://www.dynamicinvestorpro.com

In the current investing climate many investors are seeking out alternatives to traditional investment assets in an effort to boost poor returns and bolster the limp performance of their pension portfolios. While stocks and shares continue to display the kind of up-and-down volatility that would make a rollercoaster jealous, real-assets including fine wine, stamps, land and forestry have all continued to grow in values as rising global incomes combine with a growing global population to boost demand against a backdrop of limited supply.

Whenever supplies of an asset are limited and demand increases, we see the value increase as buyers compete for the best assets, so those investors in control of finite resources are likely to continue to capture capital growth regardless of the performance of the wider economy.

Whilst in is certainly true that some alternative investment assets rely on the existence of wealth for their end-use market; for example stamps and fine wine rely on the existence of wealthy buyers, it is also true that certain essential assets will enjoy a demand even if the global economy were to collapse tomorrow. These safe haven alternative investments include agricultural land, energy-generating assets, infrastructure and commodity driven properties such as forestry investments.

There is a limited global stock of land suitable for agricultural production and demand for food commodities and feedstock for animal feed and biofuels in growing exponentially as developing nations expend their populace and rising incomes lead to greater consumption of commodities. Indeed the giant populations of India and China are entering their most resource-intensive phase of growth, just like the west during the industrial revolution. The difference here is that the populations and resource requirements of these countries is much larger. This makes agricultural land a precious resource that is likely to become one of the most valuable assets on earth. Not only that, but goof quality farmland produces annual income from the production and sale of food commodities, so income streams also rise as food prices increase. It is worth noting that the amount of arable land per person on the plant has halved since only the 1960’s, going some way to explaining why so many institutional investors are holding more and more agriculture investments.

Renewable energy investments that produce income from solar, wind or agricultural crops are also seen as a potentially great alternative investment opportunity as they continue to generate revenue regardless of dividend performance in traditional investment markets. As long as the wind keeps blowing and the sun keeps shining, those in control of renewable energy investment assets will continue to earn up to 20 per cent per annul income yields based on current project establishment costs.

For the long-term investor, forestry investments continue to grow in any economic weather, because the majority of financial returns is actually driven by the biological growth of trees, not the performance of the economy. Whilst a relatively buoyant economy is essential in order for there to be demand for timber products, it is growth in emerging market economies what will drive future demand, and so investors who own a stake in a commercial forestry investment property close to emerging markets are likely to capture non-correlated growth and be able to create substantial revenues from the sale of essential commodities as trees turn into valuable timber stands.

In summary, alternative investments are popular because they generate returns not dependent on traditional markets, but investors should always be careful as these kinds of real-asset alternative investment all carry asset, location, sector and counterparty specific risks that many investor may not recognise or be able to screen for, so the use of an experienced consultant with a good track record of identifying successful alternative investment assets is essential in order to avoid undue risk and maximise upside potential.

David Garner is Partner at DGC Asset Management, an alternative investments boutique specialising in property transactions in the agriculture and renewable energy sectors.

Last year the stock market roller coaster had a lot of investors wary about investing in stocks. In a single day, investors lost hundreds of thousands of dollars. Quite a few IRA’s were completely wiped out and many took nose dives. While all this happened, comic investing flourished. Demand for certain issues rose in value, and certain golden and silver age comic books set record prices in 2011.

A CGC 9.6 Amazing Fantasy #15 (1st Appearance of Spider-Man) sold for $1,100,000 in March 2011, while a Fantastic Four #1 CGC 9.4 sold for $300,000 in 2011, beating its previous sales record of $210,000 in 2010.

There’s no doubt that long term comic investing can be quite profitable, and for those who are new to the idea, there’s one simple secret that can help you when it comes to investing in comics.

What is it?

It’s comic book movies. Yes, Hollywood has turned to the superhero genre for fresh content when it comes to movies. What’s better is these movies are extremely successful.

Learning about which movies are rumored or even coming out for a certain superhero is critical in choosing comic books to invest in. Researching and keeping up to date on the development of a certain comic-related movie is vital, because the hype pushes the demand and the value of the comic a lot quicker than it normally would.

A movie about Superman will spark interest and demand in his books. Pretty simple, huh? Not really.

Not just any comic will do. Sure, Captain America: The First Avenger did spark more interest in Captain America comics, and they sold quite well during the hype of the movie. However, we are talking about investing in comics that will rise in monetary value. Just because it’s a Captain America book doesn’t mean it will rise in value.

In this case, the values of only certain comic book issues are increased during a movie’s hype. Finding these key issues is just another important part of making wise comic book investment choices. You need to research what’s going on with these movies, and not just grab any thing off the shelf just because that character will come out with a movie.

So know you know one simple secret to help guide you to smarter investment comic choices. Now, it’s time to find out just which of these key issues you should be on the hunt for.

Discover the top comic books to invest in for 2012? Visit the link to read more articles about comic investing and which comic books will increase in value quickly and steadily for the next few years.

http://www.totalcomicmayhem.com

People are worried, concerned and yes, even scared. How do you invest in these volatile and uncertain times? The memories of the Global Financial Crisis (GFC) of 2008-2009 are still fresh. They themselves may have “lost” money during this period as have many of their friends. They know people or have heard stories of people who “went into cash” at the right time.

The global economies and investment markets are again facing new uncertainly and volatility. People are asking themselves and their advisers questions such as:

• Will I lose my money?

• Is any place safe?

• Should I go into cash?

• Am I wasting my money by salary sacrificing into superannuation?

Let’s look at the recent past and where we are now.

In the beginning

The Australian share market peaked at around 6800 in November 2007. Concerns over the American subprime market and the creditworthiness of the debt products arising from these mortgages, Collateralised Debt Obligations (CDO’s), began to appear however the crisis did not reach a climax until September 2008 when the Americans permitted the large investment bank Lehman Brothers to fail. Up to that point the debt crisis and resulting failures of financial institutions in American were contained.

Once Lehman Brothers failed, there was a massive global loss of confidence and lending between even large financial institutions froze as there was a fear that they could not repay their borrowings. Investment uncertainty and volatility increased. Interest rates in Australia and overseas fell rapidly, governments propped up financial institutions, and there were massive government stimulus packages as well as government guarantees over depositor’s funds. The Australian share market hit a low of around 3100 in April 2009.

Some Hope

Gradually the measures in Australia and overseas took effect. Confidence rebounded to some degree and the Australia share market was soon back to 5000. The Reserve Bank began to raise interest rates from the low of 3% to 4.75% by November 2010. Talk was of how soon the federal budget would be back in surplus and how to contain the inflationary effects of the resource boom. Investment uncertainty and volatility decreased and money came back into the market.

The picture overseas was mixed. The BRIC countries of Brazil, Russia, India and China continued to grow at a fast pace as did other emerging and secondary economies such as Vietnam, South Korea, Malaysia, Turkey and Argentina to name a few. Commodity prices rose which has helped Australia as well as the oil rich countries.

Too soon to celebrate

Against this good news the effects of the GFC have had a lasting impact on other countries which have struggled with debt and economies which have not fully lifted out of recession. In Europe the debt crisis spread from Ireland to Greece and then to Portugal and more recently doubts over whether Spain and Italy can manage their debt. Countries such as Germany, which have bounced back strongly from the GFC, are reluctant to fund the mismanagement of the PIIGS (Portugal, Ireland, Italy, Greece and Spain).

The big concern however is the effect that a default of even a country such as Greece would have on the countries of the Euro. As 2011 progressed and into 2012, this concern has had a major impact on the share markets.

The other focus of bad news is the debt problems of America and its continuing lack of growth. America has taken on huge debt funding wars in Iraq and Afghanistan, the bailout of financial institutions, a loss of revenue because of tax cuts to the rich and unfunded social security entitlement programs authorised by the Bush administration.

Market panic occurred in July and August 2011 when the debt problems in Europe became more serious and the political brinkmanship in America over lifting the federal government’s debt ceiling brought about a lack of confidence which was brought to a climax when Standard and Poor lowered their rating of American debt. The Australian market had one of its largest falls on 9th August, although it rebounded the same day. Once again investment uncertainty and volatility increased.

Going Forward

Major concerns on people’s minds are as follows:

1. We have a situation where Greece will almost certainly default on its debt, which could spread to other European countries.

2. Economic growth is poor in much of Europe and America however the means to stimulate growth through deficit financing and the lowering of interest rates is not available.

3. America has unique and persistent problems such as falling house prices, a reluctant to raise taxes and the ongoing drain of overseas military commitments.

4. There is friction between China and its trading partners, especially America, over the value of the yuan and persistent trade imbalances.

5. There are special concerns over China such as its continued desire to hold low yielding American debt and the sustainability of its economic model which has been reliant on exports and investments.

These concerns are summarised in a fear that we are on the verge of a second GFC. Hence the questions presented at the start of this article.

This is a reprinted summary from an article in http://www.barrylizmore.com.au

Barry Lizmore is a financial planner in Melbourne Australia and is a lecturer in financial planning at Deakin University. I have recently written a book, “Take Control of Your Money” which explains the financial planning process and answers questions such as:

My educational web site which includes information on my book is http://www.barrylizmore.com.au

Should I switch my investment selection to cash?

People who have existing investments in superannuation or non-super investments may have the facility to switch investment options. Typically they are in a balanced or growth fund which have a high exposure to growth assets such as Australian and international shares and property.

A balanced fund typically has 60% to 75% exposure to growth assets while a growth or high growth fund may have up to 100% in growth assets with a typical asset allocation of say 50% Australian shares, 40% international shares and 10% property.

The greater the exposure to growth assets, the greater the long-term investment return however the greater is the volatility. When we talk about the risk of an asset allocation we generally do not mean that you will lose your money, but rather that the investment returns are more volatile. You will have a wider range of investment returns and a greater incidence of negative returns.

The more defensive assets that you have, such as cash and fixed interest, the lower the long-term investment return, however the lower the volatility. This is known as the risk/return trade off. As much as we would like it, you cannot have both high investment returns and low volatility.

By switching from a balanced fund or growth fund into a defensive asset such as cash you will reduce volatility which does limit the further downside if the market continues to deteriorate. You must however realise the consequences of your action.

Consequence One – You crystallised what has been a paper loss.

Let us assume that you are invested in growth assets. There has been a 20% fall in the share markets. You are scared that you could “lose” more money and so switch into cash. Yes, the share market could fall further and you would limit the downside risk, but have you really “lost” any money at this stage?

If you are invested in a well diversified managed investment which holds quality assets you have not lost any money until you decide to sell. The managed investment may well hold the same assets each day such as the same commercial office buildings, the same share of airports and other infrastructure and the same shares in blue chip companies, however the market prices these assets higher or lower each day for various reasons. It does not mean that the long-term investment value or earning capacity of these assets has changed.

A good example is your home. Each day your home is worth more or less for various reasons such as a change in interest rates, employment or a change in housing supply, however you do not see this change in value until you sell your house or your neighbour sells theirs. Note that your house has not changed. It has the same number of bathrooms, bedrooms, kitchen fixtures and landscaping.

Now suppose that you have decided to sell your house but there is no urgency. If there was a sudden downturn in the market would you sell your house then or would you wait for the market to recover and then sell? Most people would wait for the housing market to recover however it is amazing how these same people take the opposite view to their investments such as superannuation and sell at the bottom of the market.

Consequence Two – You miss the upside when the markets come back.

People who make the switch from a balanced or growth fund into cash say that they will get back into the market, “when things settle down.” But what does this mean in reality? When do they go back into their higher growth option? After the market has already gone up 20%?

There is no bell that goes off when the share market has reached a low point and a bull market returns. Typically most of the investment returns after the end of a bear market happens within a relatively short period of time after the low point. If you “cash out” once the market has already fallen 20% and then wait until the share market has “settled down” and has recovered 20% you have lost a significant portion of the value of your investment which could have been avoided if you had stayed in the same investment option throughout the market downturn.

Many people make the classic mistake of looking in the rear view mirror and follow past investment returns. They buy high and sell low.

Yes, by switching from a balanced fund or growth fund into a defensive asset such as cash you will reduce volatility which does limit the further downside if the share market continues to deteriorate. You must however realise the consequences of your action.

This is a reprinted summary from an article in http://www.barrylizmore.com.au

My educational web site which includes information on my book is http://www.barrylizmore.com.au.

Whilst forestry investments are seen by many institutional and private investors as a potential safe haven from the volatility associated with traditional asset s like equities, at the same time there are a number of variables linked to the general economy that do have a significant bearing on the performance of the asset class.

For the most part, current market demand for timber in any given location is the biggest influence over timber prices. As with any commodity, when stocks of the product are high and demand is suppressed then prices fall as assets are sold off at knockdown prices to create revenue. Likewise, when supplies are limited and demand is high, then we see the opposite happen; commodity prices rise as buyers compete for the best quality and indeed quantity.

In fact, it is worth touching on the cyclical nature of any commodity market, but especially soft-commodities. If a poor global harvest causes a shortfall of wheat, then prices rise, as the price rises, farmers plant more of the crop the next year as the higher price makes it more profitable. So the next year you have a surplus of supply as more acres are sown to wheat and subsequently the prices fall. And there you have it! A beginner’s introduction to the basic rule of commodity price cycles.

So we have ascertained that demand affects prices, but what impact is that likely to have on the performance of forestry investments? Well the answer in short is not as much as one would expect. A number of credible academic studies have revealed that forestry investment returns are driven by the biological growth of the tree into valuable timber stands (605 of returns), whilst timber price appreciation accounts for just 6%, and besides, when prices are depressed, timber growers simply leave their trees to grow, getting bigger and offsetting and drop in timber prices, an action known as storing value on the stump.

One must also consider that demand for timber is regional, which effectively means that a forestry investment in one area might perform markedly better than a timber investment in another area, simply because demand for wood products in region A is much higher. I for one have always found it to be quite misleading to use global statistics to define the potential performance of a local property-based investment such as forestry. Let’s look at like this; housing starts in the USA are low because the economy is depressed so timber prices are low due to a low demand (fewer people and businesses are building or remodelling homes), whereas in China, India and Central America, demand is increasing daily as both countries enter into their most resource-intensive phase of growth, building houses, infrastructure and demand more biomass for energy production. It goes without saying then that a timber stand in Florida might be worth less today than a timber stand in Latin America where demand is much higher and the property is better positioned geographically to participate in the supply chain in the region.

In summary, a range of factors affect demand for wood products and therefore the potential performance of forestry investments, but these variable are not global but local, so one must look to the dynamics of the market most relevant to the location of a particular forestry investment if one is to plan and project effectively and accurately.

David Garner is Partner at DGC Asset Management, an alternative investments boutique specialising in property transactions in the agriculture and renewable energy sectors.

People get stupid in different types of economies. In a strong economy, collectable investors seem to be overly confidante and frivolous. In a weakened economy, those same investors seem to be timid and stubborn. I am sure this sounds all too familiar to many of you, and personally, I have been accused of being both. Such simple actions and behaviors may contribute to questions about the causes of a weakening economy, and its duration. In a strong economy, most collectable investors tend to over-spend for single collectable investments. When the economy inevitably weakens, these same investors are stuck with single investment items because other buyers are unwilling to purchase items that are either over-priced or that have a selling price that is too high for a single collectable item. Without a doubt, strong buying continues in the collectable market, even in a sagging economy; however, as collectors become smarter, they are staying with lower-end items to protect themselves against adverse economic situations. I am confident in stating that although the total unit numbers for collectable purchases has increased every year since I began collecting in 1975, the prices per item have decreased recently, due to the sagging economy. This scenario of increases in total purchases and decreases in overall prices per item has created huge investment potential. I am not suggesting you go out and be a bull collectable investor in a weak economy. I am saying that your collectable investing needs to be balanced and adjusted based on your own personal economic situation. Your investment strategy should always be the same, regardless whether you are buying stocks, houses, Hall of Fame trading cards, coins or comic books. Your strategy for purchasing collectable investments should contain two key components: assortment buying and buying lower-cost collectables. Both components will protect your collectable investment potential.

How does assortment buying protect investments? Buying assortments of collectables is your best tool for protection from the bad choices we can all make when buying the collectables we enjoy. Let me keep this strategy simple. If you buy one collectable item and it goes down in price, you are working at an investment loss. If you spend the same amount of money on ten different items and three go down and the other seven go up, you are working at an investment gain. In the ten purchases scenario, you can make three bad choices and still come out ahead, verses the one purchase scenario, where you will have an investment loss.

Farmers are smart people. Remember the old adage: “Don’t put all your eggs in one basket.” An example of this, as it pertains to trading cards, might be that if you spend all your collectable investment money on a football rookie card, or on a football player autographed 1/1 card, and when a 300-pound lineman falls the wrong way on the leg of your investment cards’ player on Sunday, YOU’RE BROKE! Think before you buy and try these two strategies, instead. Buy an assortment of your favorite players that have already played the game and established a great career and who cannot get injured in a way that can hurt your investment; or, use part of your collectable investment money for buying newer rookies, and part of your money for purchasing Hall of Famers that have already accomplished a career. Buy your collectables in a variety to protect yourself from bad collectable investment mishaps that you cannot control. Keying on one player, in one moment in time, is as absurd as taking all your hard-earned money and betting one number on a roulette wheel. I understand that works on television. The TV star always hits it big or has a rich relative who bails him out in the final minutes of the show, but that’s just not real life.

The second component in your investment strategy should be the purchasing of lower-cost collectables; that protects investments. The reasoning behind this is simple. More people have one dollar in their pocket than one thousand dollars. I know this may be simplifying this strategy; however, you must think when you are buying collectables that one day you may want to sell the items you are buying. This does not have to be your total focus when buying, but it should be part of your decision making process. Let say, for example, that when the time comes to sell, your marketing strategy is to sell your collectables at a trade show. If you were to poll each buyer at the show on how much money they want to spend on collectables, you would have an assortment of different dollar amounts. Some buyers will be willing to spend twenty dollars, a fewer number will be willing to spend fifty dollars, even fewer will be willing to spend a hundred dollars, and so on. One thing remains constant with each of the trade show buyers. The few buyers who are willing to spend a thousand dollars will also be willing to spend only twenty dollars; however, the buyers who are willing to spend only twenty will not spend a thousand dollars. To conclude this simple point, if you have a twenty-dollar collectable, your potential greatly increases to sell it if every buyer at the show has that minimum amount to spend on a collectable. If you have a thousand-dollar item to sell, your pool of potential buyers decreases astronomically if that is the maximum amount only certain buyers at the show have to spend.

There are many strategies that come into play when dealing with collectable investment potential and I have only shared two. I believe these are the two main strategies that can help provide some potential now, as well as some protection against weak economic times. They can also help you capitalize on strong economic times in the future. The bottom line is that everyone will have possessions, and memories to go along with those possessions. Some of the key ingredients to collectable investing in a weak economy are the same key ingredients in life. If you balance yourself, you will find enjoyment and happiness. If you extend too far, you risk your balance and happiness. Think ahead. Live today. Cherish your love ones. Enjoy your hobby.

Billy May

http://cardsone.com