Investment Articles

The best investment opportunity for 2012 and 2013 could be stocks, but any bond investment is suspect at best. With even the best safe investments paying zip it’s important to look for investment opportunity elsewhere. How about an investment in real estate that requires no time, effort or management on the investor’s part?

Real estate is the best investment opportunity for 2012, 2013 and going forward because it’s selling cheap. Interest rates are at historical lows, which is also great for investors buying properties. Record low rates are very BAD for bond investors, because bonds pay a fixed interest rate. In fact, when rates do go up – bond and bond fund investors WILL lose money as bond prices (values) fall. That’s the way bonds work.

As an investment opportunity stocks and stock funds are the wild card. Stocks could go up in value as bonds fall: that’s the way it has worked for many years now. But stocks are not cheap… having doubled in value between early 2009 and early 2012. Gold is not cheap either, having been on an up trend for more than 10 years. This leaves real estate as the best major investment opportunity available to the average investor.

Opportunity in real estate is everywhere in the USA for 2012 and 2013. The problem with investment here for the average person: management and a lack of liquidity. Someone has to deal with the day to day operations; and you can’t buy, rent and sell a property investment quickly and easily without significant costs. Or, can you?

The best investment opportunity is staring you right in the face if you know where to look, and it’s designed to solve these problems for the average investor: real estate stock mutual funds. These are the best investment opportunity for the average person who wants a piece of the action in his or her portfolio. No active management is required on the investor’s part, and you can buy today and sell a day later if you want to.

Professional portfolio managers make the investment decisions for you.

If you know which mutual fund companies to invest with your real estate mutual fund investment can also be a BEST BUY. No charge to buy or sell, with less than 1% a year going to pay for management expenses. That’s why I call these funds your best real estate investment opportunity for 2012 and 2013 and beyond. These funds hold equity (stocks) in companies that invest in the likes of office buildings, other rental properties, shopping malls, and home builders.

When you consider your choices, real estate stands out as the best investment opportunity going forward. Your best way to invest is in no-load mutual funds that specialize by holding investment trusts that own commercial properties diversified across the USA. To find your best deal search for “no-load real estate mutual funds” on the internet.

Author James Leitz has 40 years of investing experience and would like to help you learn how to invest. Get up to speed on how to invest at http://www.investinformed.com.

Exchange-Traded Funds (ETFs) are investment funds that aim to track the performance (value or price) of an index, a particular commodity or a group of commodities, or other financial products. For example, by buying shares of the DBS Singapore STI ETF you are effectively investing in the 30 stocks (ie, Singapore Telecommunications, Wilmar International, DBS Group, etc) that are tracked by the STI (Straits Times Index).

Like other funds (Unit Trusts, Mutual Funds, etc), ETFs invest in a portfolio of stocks, thus providing you, as the investor, access to a wide range of markets, sectors and asset classes. Unlike unit trusts, however, ETFs are listed on stock exchanges and are subject to brokerage commissions, just like shares on stock exchanges. (Unit trusts must be transacted through a fund manager, and are usually subject to management fees and/or sales charges.)

ETFs come in many different forms, including:

Bonds- Hold, or track the performance of, a basket of bonds (eg Singapore government bonds)

Equities- Hold, or track the performance of, a basket of stocks (eg stocks of Singapore companies; companies in emerging economies; globalompanies)

Commodities – Hold, or track the price of, a single commodity or basket of commodities (eg gold, silver, metals)

Currencies- Track a major currency (eg Euro)

In the US, there are ETFs that represent almost every sector of the market: stock indexes such as the Dow 30 or S&P 500; stock sectors such as healthcare, retail and technology; and commodity sectors such as agricultural products, gold or oil. There are ETFs for large companies, small companies, real estate investment trusts, international stocks, bonds and even gold and silver. Today there are also synthetic ETFs that use financial derivatives to mimic the performance of other ETFs, though these would not be suitable for the average investor because of the more sophisticated financial knowledge involved.

There are several advantaged and disadvantages associated with ETFs

Advantages of ETFs

Flexibility and Transparency – ETFs are publicly-traded products: since they are listed on exchanges, their prices are known throughout the trading day and they can be bought and sold the same way you buy and sell

shares (online or via your broker), during local trading hours.

Risk Diversification – ETFs allow you to achieve some degree of diversification: you gain access to multiple

markets in a single transaction, with minimum investment and via a single platform.

Low Expenses- Total expenses for ETFs (0.3-1%) are usually lower than for unit trusts (1.5-3%); in fact, they are

typically 0.65% in Singapore and even lower in the US.

Disadvantages of ETFs

Existence of Trading Costs – You must pay brokerage commissions to buy and sell ETFs, making ETFs more suitable for single, lump-sum investments than for small, regular investments. Investing in ETFs

ETFs in Singapore

Here are some quick facts on ETF trading in Singapore:

• As of Feb 2011, Singapore had 75 ETFs with about S$3.2 Billion (S$3,200,000,000) in assets listed on SGX, the Singapore Exchange. By comparison, the Asia-Pacific region (excluding Japan) had about 190 ETFs with about S$52.5 Billion in assets by end-2010, while the US alone had about 1,100 ETFs with more than US$1

Trillion (S$1,270,000,000,000) in assets by Feb 2011.

• SGX has:

» Country ETFs for Singapore (3 ETFs), Australia (1), Brazil (1), China (6), India (5), Japan (3), Malaysia (2) and Russia (2), amongst others;

» Region-wide ETFs, including those for the Asia-Pacific (5), emerging markets (4) and global markets (2);

» Commodity ETFs for a broad basket of commodities (5) and gold (1);

» ETFs for Fixed-Income instruments (mostly bonds) and Money-Market instruments.

• As of Jan 2011, ETFs made up just 1.5% of trading volume on the SGX, compared to 14% in Europe and 40% in the US. However, growth has been dramatic: ETF volume on the SGX in 2010 was 45% higher than the volume in 2009.

• You can currently use your CPF savings to invest in 3 ETFs:

» ABF Singapore Bond Index Fund;

» streetTRACKS Straits Times Index Fund;

» SPDR Gold Shares Trust.

• ETFs can be transacted through your usual SGX listed stock brokers; the usual commission rate of between 0.18-0.28%, depending on amount, applies.

Conclusion

ETFs are best viewed as combining the risk diversification of unit trusts with the flexibility of stocks. They are a practical implementation of the philosophy of Index Investing which downplays picking individual stocks in favour of picking sectors, markets or geographical regions.

However, you should understand that, like any investment, ETF investments carry risks. Diversify even when investing in ETFs. We suggest you spread your ETF investments amongst an ETF on precious metals, an ETF on the STI, an income ETF, an emerging market ETF, and an ETF on developed/global economies. This diversified portfolio is well within the means of the average Singaporean investor.

Finally, the fact that ETFs are listed on exchanges means that both investing strategies (eg, a longerterm, buy-and-hold approach) and trading strategies (eg, a shorter-term, more active, buy-when-low and sell-when-high approach) become possible.

Disclaimer: Traders Round Table has no interest, financial or otherwise, in any of the ETFs mentioned or in any fund management companies; names have been mentioned only to make examples easier to understand.

Additional Reading

• ETF assets and listings in Asia Pacific ex-Japan continue to grow (Professional Adviser)

• ETF trading in Singapore to grow (Channel NewsAsia)

• Exchange Traded Funds (SGX)

• Exchange-Traded Fund (Wikipedia)

Thomas Saw is the founder of the Traders Round Table ( http://www.tradersroundtable.com.sg ), a community of committed traders and investors. TRT’s mission is to help people be more successful in Creating, Protecting and Enhancing their wealth in the financial markets. We help fellow traders and investors by providing holistic, broad-based financial trading and investment education, mentorship and psychology. Vinay Kumar Rai is a freelance writer and a member of the TRT.

The most popular type of investments that people make are in collective investment schemes. This makes a lot of sense as it reduces risk for the investor.

Collective investments are funds where the monies of a large number of investors are pooled together under professional investment management. The investment manager then acts collectively on their behalf.

The most popular collectives are unit trusts, investment trusts and Open Ended Investment Companies (OEICs). Then there are offshore funds, with-profit funds, commercial property funds, corporate bond funds, exchange traded funds (ETF’s) et alia.

Of course, some people prefer to invest direct. This obviously takes a lot more time for them to do all the research – ideally beyond just reading the financial press. The problem is that, as several independent research studies show, people who invest direct tend to do worse than institutional investors for various reasons, mostly due to their own actions. These include lack of diversification, compulsive trading, buying high, selling low, going by hunches and simply by responding to media and market noise.

The latter often means that such investors end up investing on the basis of past performance. They read about good past performance for a 12 month period and then invest, when there is no certainty that this will lead to better returns the following year.

Financial markets are cyclical and the key to successful investment (as opposed to day trading) is not timing but patience. A buy and hold strategy may not be as sexy and exciting but it seems to work most of the time. On the other hand, becoming addicted to trading does not help in most cases.

A lot of the above behavioural traits that end up causing investor problems stem from over-confidence. In reality, what is required for most individual investors is to get their egos and emotions out of the investment process. One answer is to distance themselves from the daily noise by talking to an independent financial adviser, to help stop them doing things against their own long-term interests. It is quite likely that the financial adviser will recommend collective investments.

The major benefit of collective investments is that they can reduce the risk of investing, by spreading the risk of their investment. The fund manager is able to purchase a far greater number of investments than the individual investor possibly could. Because of this, the possible impact on the collective investment fund caused by one particular investment performing badly is low, as it forms only one small part of a much larger investment portfolio.

Collective funds also provide a higher degree of diversification. For example, if you were looking to invest in UK smaller companies, it would be impractical (in terms of costs and research time) to invest in more than a couple of companies. A fund manager, however, can buy shares in many companies and spread the investment further. The fund managers will also have the in-depth knowledge plus a team of researchers behind them to monitor the sector for new opportunities as well as potential problems.

A further benefit is that fund managers have access to markets and instruments where individual investors don’t have the knowledge, capital or perhaps even the legal right to invest. This includes hedge funds, emerging markets, private equity situations and complex derivatives.

With thousands of collective funds to choose from, the question is how to pick the best funds for you? It is not an easy process, even for professionals. But getting quality financial advice from an independent financial adviser should certainly help you with your overall investment planning process.

Chris Flood, MA (Oxon), MBA, is a marketing and management consultant based in Bristol UK. He writes articles on investments and financial planning as well as other subjects. To discover more about income investing, please go to http://www.kelland-hale.com/collective-investments.asp

Further information about Kellands Hale and its services can be found at http://www.kelland-hale.com/

Understanding investment

Investment can seem like an attractive option for increasing return on your capital, especially when interest rates on savings accounts are so low.

Whether you are looking to invest yourself, or for someone to invest your cash on your behalf, there are several factors you should consider before you begin.

How much can you afford to invest?

It is important to recognise that when you begin investing your money you will introduce an element of risk to your capital. Generally the higher the potential for return the higher the risk to your capital, so don’t be sucked in by high rates but consider carefully how the investment would sit with your attitude to risk.

Before you start investing you should ensure that you finances are in order and that you are not investing with money that you can afford to risk losing. For example, will you be able to pay all your debts easily? Do you have a buffer of savings to fall back on? Many experts recommend that you have the equivalent of at least three months wages to fall back on in case of hard times.

Why are you investing?

Before deciding on the right investment option for you, you should have some sort of financial goal in mind. Are you looking to generate an income from your investment, or simply to increase your capital?

Set a time frame within which you can realistically achieve your financial goals, and decide on how long you are willing to commit your capital in order to achieve your desired returns. This will help you to find the right kind of investment for you. If you have goals in mind, you can easily tell when they do not live up to or exceed your expectations.

What type of investment?

There are four main investment options available-

1) Stocks and shares

2) Investment funds (including Unit trusts, OEICs and tracker funds)

3) Investment trusts

4) Bonds

The right one for you will depend on you attitude to risk. For example bonds tend to be a safer option than investing in stocks and shares, but you will be likely to see lower returns. which option is most suitable for you will also depend on whether you are looking to make a lump sum investment or if you want to invest more regularly in smaller amounts.

Diversification

Investment almost inevitably comes with an element of risk, however by diversifying your investments you can reduce risk. Investing in areas of assets that have little in common means that if one area fail it won’t take your full investment down with it. You can diversify your investments by putting money into different companies, markets, assets or types of investment.

Understanding investment can be complex, and you may want to seek professional advice those who have a greater understanding of the market.

John T Hughes writes for Share Dealing Account, a leading online source of information on share dealing accounts in the UK.

Small-scale fine wine investments are increasingly popular, especially in the UK. What was once a select investment opportunity, limited to wealthy connoisseurs, has now become much more accessible. The Internet, the growing number of investment trusts, and the greater amount of information about fine wine available have all contributed to bringing wine investments closer to mainstream. Yet investing in fine wine is not without its risks. Here’s some food for thought.

Great Wines in Great Years Are Most Rewarding

Not all fine wines can make you rich. Truth be told, most bottles, even well-know ones, bring moderate revenues, and only after they reach maturity (at least a few years). Only the top bottles from prestigious vineyards bring fantastic profits, and these are hard to get. The safest bet is to invest with care in lesser fine wines, and to be realistic. And don’t forget that you can always drink your wine instead of selling it.

Buying Wine Before It’s Bottled Is Risky

Many fine wine investments these days entail that you buy wine before it’s bottled. This is a common practice especially when it comes to Bordeaux wines. Know as ‘futures’ by insiders, this type of investing riskier, especially for starters. There are many variables involved here, such as final quality, demand, market price fluctuations, and so on, all of which need to be carefully considered. This is not too say that ‘futures’ are to be avoided; not at all, they can be the most lucrative investments. Yet they must be indulged in with great care.

It May Be Trickier With New World Vintages

American fine wine investments may be particularly challenging, because the vintage makers in the US are not as firmly established as those in Europe. There are famous California red producers, such as Opus One and Screaming Eagle, yet the prices are much more fluctuating than in the Old World. The chief factor that sets wine price in the US is not wine maker prestige, but demand. For a UK investor it can be harder to keep up with all the developments of the US market. There always, of course, exceptions.

Wine Lovers Are Less Likely to Regret Their Investment

Finally, you have to keep in mind that fine wine investments, just like any other types of investments, can always fail to bring you the expected returns. In such a scenario, are you ready to put your worries aside and enjoy a glass of fine wine, from the bottle in which you invested yourself? If not, then you may be better off considering other types of investments, such as those in contemporary art, silver, or gold.

If you are looking for best alternative investments, experts at Compare the Financial Markets will help provide valuable assistance.

Investors looking to diversify their portfolios and insure their wealth against the ravages of volatility in traditional markets, will most likely have come across a range forestry investments, promising to generate superior inflation-adjusted and risk-adjusted returns for the long-term investor.

But how have timber investments performed? And how does the smaller investor participate in this interesting alternative investment asset class?

Firstly let’s look at the past performance of forestry investments, as measured by one of the main timber investment indices, the NCREIF Timberland Index; according to this basic measure of investment returns in the sector, this asset class outperformed the S&P500 by some 37 per cent in the 20 years between 1987 and 2007. When stocks delivered average annual returns of 11.5 per cent, forestry investments returned 15.8 per cent.

At the same time, returns from investing in timberland and woodlands have been proven to display a much lower volatility, an attractive characteristic for today’s investor.

Previously, the majority of investment returns from forestry investments have been mopped up by larger, institutional investors such as pension funds, insurance companies and university endowments, who have collectively placed over $40 billion into timber investments in the past decade.

So on to the second question; how do smaller investors participate in this kind of alternative investment?

According to a study by Professor John Caulfield of the University of Georgia, returns from forestry investments are three-fold;

An increase in timber volume (biological growth of trees), which accounts for some 61 per cent of return on investment.
Land price appreciation, accounting for only 6 per cent of future returns.
Increase in timber prices per unit, delivering the final 33 per cent of investment returns for timber land owners.

So the best way to harness the performance of timber investments is to take ownership of trees, either directly, or through one of the array of forestry investment funds or other structures.

Timber REITs

One way for smaller investor to participate in timber investments is through a Real Estate Investment Trust (REIT). These investment structures are like funds, in that investors can buy and sell shares in the trust on an exchange, the REIT acquires and manages timber investment properties, but unlike normal companies must pay out 90 per cent of their earnings to investors through dividends.

Some examples of Timber REITs are:

Plum Creek Timber is the largest private owner of timberland in the U.S. and the largest timber REIT with a market cap of about $5.6 billion, many investors have chosen this as their route into forestry investments.

Potlatch is also a timber investment REIT while

Rayonier generates about a 30 per cent of its REIT earnings from timber.

Weyerhaeuser has disposed of its paper and packaging businesses and will convert to a REIT by year end.

The Wells Timberland REIT is not publicly listed but may be available for purchase through Wells Real Estate Funds.

Another way for smaller investors to add forestry investments to their portfolios is to buy Exchange Traded Funds that attempt to track the performance of timber returns. This is less direct than owing timberland, or investing in a timber REIT, as the ETF may also invest in shares in companies involved in the timber supply chain including processors and distributors. This means that investing in forestry through ETFs exposes the investor to some of the volatility of equity markets.

The Guggenheim Timber ETF owns about 25 stocks and REITs involved in the global timber and paper products industry with a 30% weighting to U.S. companies.

The S&P Global Timber & Forestry Index Fund holds 23 securities and is 47 per cent invested in the U.S.

Timber Investment Management Organisations (TIMO)

Those with more capital to spare can participate in forestry investments through TIMOs, although the majority of these investment specialists require a minimum investment of $1 million to $5 million and a commitment to tie up funds for up to 15 years. TIMOs essentially trade timber land assets, acquiring suitable properties, managing them to maximise returns for investors, the disposing of them and distributing profits to shareholders.

Many experts believe that the active management style of TIMOs ensures that they can be more reactive to market conditions than REITs, and therefore don’t tend to fall and rise in line with the market quite as much.

Direct Forestry Investments

Those with access to sufficient capital and the appropriate expert advice can invest in physical properties. Commercial timber plantations are complex operations that require skill, knowledge and expertise to manage effectively and maximise returns whilst lowering risk.

For armchair investors, or those with less capital to spare, many companies offer investors the opportunity to purchase or lease a small portion or plot within a larger, professionally managed timber plantation. Investors normally take ownership of their plot and trees via leasehold, whilst the timber investment company plants, manages and often harvest the trees on behalf of the investor.

Options for investors range from species to species and region to region, with current opportunities in Brazil, Panama, Costa Rica, Germany, Nicaragua and other, more exotic locations like Fiji.

Investors should be wary as many of these direct forestry investments are frontloaded with enormous commissions for salesmen and promoters, with many offering ‘agents’ up to 30 per cent commission for the sale of plots to investors, and in many cases, no due diligence even exits.

In some cases, the Author has seen forestry investment plots in Brazil packaged and sold to investors for over £100,000 per hectare. Investor should seek advice from an independent consultant with experience of this alternative investment asset class, and who is able to present a complete suite of due diligence material, including an independent valuation of the forestry investment property on offer.

Summary

Investors choose forestry investments due to their effect as an inflation hedge, and their ability to generate non-correlated return on investment in the long-term.

Performance of the asset class is driven by demand for timber, weighed against global supplies, and in the long-term we are using timber at a faster pace than we can grow it, making timber investments an attractive asset class for the investor seeking stable, long-term capital appreciation within their investment portfolio.

Investors looking into which type of forestry investment is right for them should consult an adviser that can demonstrate experience and expertise within the sector.

DGC Asset Management Limited is an alternative investments business, identifying opportunities to invest in non-correlated assets.

David Garner is Partner DGC Asset Management Limited.

An ISA is a tax free way of saving. Adults in the UK can invest up to £10,680 a year in an ISA and they will not be required to pay tax on any gains. This article looks at the advantages of ISA’s.

Non-Taxable Income

The main, and most obvious, advantage of an ISA is that you do not have to pay tax on the interest gained. For those in the regular tax bracket this means saving the 20% tax they would otherwise have to pay on the interest.

No Capital Gains Tax

As well as being exempt from income tax, an ISA is also exempt from capital gains tax. This would normally be paid at 28%.

You Have Easy Access to Your Money

Unlike some investments you have access to your money if you need it. If you realise you have invested money that you now need, it is simple to withdraw this from the investment.

Can Split Between Cash and Stocks and Shares ISA’s

ISA investments can be split between the two types of ISA; cash ISA’s and Stocks and Shares ISA’s. The total investment that can be made per year in £10,680. A maximum of £5,340 can go towards a Cash ISA, so anything above this must go towards a Stocks and Shares ISA. Should investors wish, anything up to £10,680 can go towards a Stocks and Shares ISA.

Can Invest Long Term

Money invested into an ISA can be invested for as long as the investor wishes. Although the yearly limit is £10,680, this can be invested every year with no overall limit.

Can Invest from the Age of 18

Stocks and Shares ISA’s can be opened from the time someone turns 18. It is even younger for Cash ISA’s, which can be invested in from someone’s sixteenth birthday with the £5,340 a year limit.

More Beneficial for Long Term Investments

An ISA is most beneficial where invested in over a long-term period. One way it can be used is as an extension to a pension. The longer term an investment is for, the more interest that can be gained and the more there is in the investment in total. If someone is able to invest the full £10,680 a year, that is £213,600 if they do it every year over a twenty year period. Once interest is put on top of that it is a very healthy amount.

There are also fewer risks if investing over a long period. There are ups and down in the financial markets – especially in the current economy – but over a long-term period investment will usually grow. This is even more likely if spread around among various investments products, as is the case with most investment plans and investment trusts.

Benefits to Regular Investors

Some ISA providers will reward customers for making regular investment over a certain amount. For example, they may offer higher interest rates in exchange for a specific minimum investment.

ISA’s are a great way to invest with the tax-free benefits particularly good news for investors. Stocks and Shares ISA’s are particularly advantageous as they will almost always grow more over a long-term period.

Andrew Marshall ©

Witan Wisdom are Stocks and Shares ISA providers.

Investment in oil is beneficial if one is interested in buying an exchange targeted Fund (ETF). This kind of investment may vary as of companies (e.g. ETF securities and Lyxor). Traded just like shares, ETFs reflect the price of a specific asset or index. To reduce the effect due to “contango” that happens as a result of higher oil prices for future delivery as compared to current oil price, buyers should consult a stockbroker who can suggest when to invest in ETFs. The contango can influence funds relating to near-term futures contracts that depend on the oil price.

Another option is that one can purchase shares in big companies such as Shell and BP. Buy shares of mid-sized businesses such as Cairn as well as oil “minnows” such as Tullow Oil.

* Shell: The Company pays reasonable dividend and its shares yield around 6pc. The payment is safe despite of fluctuation.

* BP: As if now shares of the company is traded at about 410p. However, the stockbroker has raised target price to 580p. In future, the shares will further rise.

* Cairn: Because of Vedanta deal, the shares of the Company drop about 9pc. However, Cairn has tried to keep its price to 446p despite of changing market scenario. In future, Vedanta deal will turn fruitful and the company will be able to achieve target price of 500p.

At present, the best option seems that one can look forward to invest in funds. Since commodities and resources companies come at a third place of the FTSE Index therefore it is surprisingly difficult to avoid changing oil prices. As per studies, there are the two BlackRock Funds which have huge oil investments. They are the BlackRock Commodities Income investment trust and the BlackRock World Energy fund.

Investec Global Energy is primarily related to companies that are into oil production, refinery and other services. The CF Junior Oils Trust is associated to companies which are into gas exploration and production. If one can take bigger risks then why not try spread betting. This type of investment option involves a low-cost method of gambling on commodities where one has higher chances of risk. With spread betting, one can bet on the future movement of oil price, but get ready to face higher risks because of uncertain oil market. Companies such as City Index or IG will allow spread betting. However, one should not indulge in spread betting without knowing implications.

The author is an experienced writer in oil related fields, who frequently writes articles related to oil prices & indexes and crude oil including tips on investment in oil. Please visit oil.com for more details.

If you start to really look at all of your investing options and you start collecting advice, it would not be long before you ran into an investment professional who touts the benefits of a “public, all-cash, non-traded REIT. ” Your first response might be, “What’s the ticker symbol?”

Since they have no ticker symbols, your next conversation would probably consist of a description of what an “alternative” investment is and how, although there is a share price, it can’t be found on an exchange. Then, if market fluctuations make you queasier with age, this investment may start sounding pretty good the more you look into it because it’s a competitive investment that takes some of your money off of the daily pricing roller coaster. You may find that it’s an alternative worth exploring, although there are, of course, pros and cons.

What Alternative Investments Are

Investments that are considered “alternative” are investments other than the traditional stocks, bonds, mutual funds, and annuities offered by stock brokerage and insurance companies. They allow for a more direct way of investing in an entity in that you buy your shares, or units, from the company itself, not over an exchange like the New York Stock Exchange or the NASDAQ. They are usually long-term investments by nature with very limited liquidity.

One of the most common asset classes for alternative investments is real estate. Real estate investment trusts provide the opportunity to invest into a wide variety of different classes and types of real estate including, but not limited to, office, retail, industrial, houses, apartments, self- storage, timberland, healthcare, and government tenant buildings. In addition, there are varying degrees of risk which usually can be measured by the level of leverage the program uses. For example, a program that buys buildings using all cash has no mortgage default risk, so interest rate risk and property value fluctuations are less of a concern. There is no mortgage to default, whereas a speculative program that uses a high level of leverage and is probably aiming for spectacular returns, is much more likely to default if there is, say, a commercial credit freeze such as we are experiencing right now. Low debt is also usually associated with competitive monthly or quarterly distribution payments with limited appreciation potential. High debt is also usually associated with little or no periodic distributions, but high appreciation potential.

Those are the extremes. There are many levels of risk in between and it takes some effort to gauge the level of risk you are taking. What is somewhat helpful is that the alternative investment industry is using some general terms when titling their programs that loosely describe the level of risk for the program. “Core” means no leverage. “Core Plus” means some leverage, with probably an overall loan-to-value ratio of 25% to 50%. “Value Added” or “Growth and Income” means moderate leverage, with probably an overall loan-to-value of 40% to 60%. “Opportunity” means they are probably on the high side with 55% to 75% overall loan-to-value.

In general, REITs usually have a Share Repurchase Program which typically states that they will buy back your shares at a reasonable discount to the purchase price in the first two or three years, and then at either 100% or the appraised REIT value thereafter. However, they are limited to redeeming 5% of the REIT per year and can stop redemptions at any time if it’s in the best interest of other shareholders. A “public” REIT is also one of the easiest alternative investments for which to qualify. You will typically need to have either a net worth of $250,000, or a net worth of $70,000 combined with an income of $70,000. It differs, though, REIT by REIT, and state by state.

Investing in real estate entails certain risks, including, but not limited to, changes in the economy, supply and demand, laws, tenant turnover, and interest rates. Some real estate investments offer limited liquidity options. There is no assurance that the investment objectives of any program will be met. REITs are not right for all investors. Be sure to consult your advisor regarding your specific situation.

To sum it up, alternative investments can be useful in several ways. They can diversify your overall portfolio, provide some tax advantages, and provide strong cash flow and/or appreciation. On the minus side, your liquidity is very limited until the program goes full cycle and returns your principal along with whatever gain or loss it generated. As with all investments, the return of your principal is not guaranteed and past performance is not a guarantee of future results.

Registered Representative of and securities, advisory services and insurance offered through INVEST Financial Corporation (INVEST), member FINRA/SIPC, a registered investment adviser and its affiliated insurance companies. INVEST is not affiliated with Retirement Solutions. This newsletter has been provided by PEAK for use by Robert Cadena. All expressions of opinion reflect the opinions of PEAK and not necessarily those of Retirement Solutions or INVEST. The information contained in this newsletter is general in nature and should not be construed as tax or investment advice. INVEST does not provide tax advice. Please consult your tax adviser for guidance on your particular situation.

Robert C. Cadena, Jr., is the founder and owner of San Antonio’s Retirement Solutions. For more information on Retirement Solutions and how it can help you plan for retirement, please call (210) 342-2900 or log on to http://www.retirementsolutions.ws

ISA stock and shares is an investing plan that allows you to put your money in a wide range of investment portfolios such as open-ended investment companies, investment trusts and also government and corporate bonds. This then means that the investment can either go down or up depending on the market trends. We are at liberty to buy our shares and then put them in an ISA. The investment can be in the range of $10, 000 upwards on any given tax year.

The ISA stocks and shares are not exempted form tax deductions. The only way through which we can save quite significantly on tax is when we buy share-based investments such as OEICs and unit trusts. There are times though when we will be required to pay capital gains tax on the same investment. If we decide to use our stock and shares to make an interest generating investment such as corporate bonds, we will then be subjected to tax-free interest regardless of the tax band we are in.

The charges for ISA stocks and shares are used for the payment of commissions to financial advisers, pay fund managers and also cover administration costs. They however vary depending on the kind of investment we have made. It is however important to note that they are in no way higher than those we would pay for investing outside ISA. There can also be a transfer of cash ISA into stocks if we so wish without necessarily affecting the allowance on the current year ISA.

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