Investment Articles

Have you had the smallholding dream? I can tell you that you are not the only one.

Many “hobby farmers” or “lifestylers”, – City workers and canny investors, are using their capital to chase the dream of agriculture and buying farmland, and non-farming buyers make up a much larger proportion of sales than ever before.

This has contributed to the recent escalation in the rise of farmland prices, as agricultural land continues to beat both commercial property and the residential market.

During the past six months arable land has rocketed in value by 8%, and by 13% year to date (July 2010) according the Knight Frank Farmland Index, with most experts believing prices will continue to rise for at least seven years.

The price of agricultural land rose by 19.7% for the twelve months to July, and continued interest from institutional funds looking to invest in agriculture by purchasing vast tracts of farmland and leasing it to commercial farmers is adding to the upward pressure.

Many savvy investors are now looking to swap faltering residential and commercial buy to let investments, and invest in a piece of good quality agricultural land instead. Some have been frightened off from the stock market due to the ongoing volatility and lack of visibility in the market and are now also investing in agriculture for a more stable income and positive growth.

These high-net-worth investors pursuing the farmland dream are not alone in their hunt to acquire and invest in farmland. Values are also feeling upward pressure as food prices increase at a time when there is a sharp decrease in the amount of agricultural land for sale.

Commodity prices for wheat and other cereals are at a 40 year low but peaked in 2008. According to leading finance broker Savills Private Finance, the actual acreage being advertised publicly has fallen from around 600,000 acres in the 1960s down to around 125,000 acres today.

There is still a lack of supply, although we source our assets from land owning farmers that want to become tenant farmers because mortgage payments are too high, so we get access to farmland that is not on the open market.

There are of course other options for investors looking to profit from the boom.

There are a number of agricultural investment funds to consider for those wishing to invest in farmland and still qualify for inheritance tax (IHT) relief.

Generally speaking, minimum investment levels are £20,000 with various modes of investment and offer the option to invest through a self-invested personal pension or offshore bond as well as with liquid capital.

As with any AIM stock, only investors choosing to hold the property for two years or more will qualify for the IHT relief.

In Europe, arable land is already worth twice that of land in Britain in places like Denmark and Ireland. Investors from these countries are now looking to the UK to cash in on the boom.

When compared to our closest agricultural rivals such as Ireland, UK arable land is still very cheap and has the margin to expand in value by 100%, I think personally that we are in for a period of prolonged growth, imagine if agricultural land values doubled by 2020, we would then be able to say that they are only priced as Irish farmland was ten years ago.

How is farmland treated by the Tax Man?

Land that is actively farmed could qualify for 100% relief from death duty, which means that there would be no IHT liability.

If the land is being farmed by the owner, you would qualify for 100% relief on the land after 24 months. Equally, the same rule applies if you have a tenant farmer do the work, as long as you have a profit share arrangement. If you lease the land to a commercial farmer, then you would qualify after seven years.

David Garner is Manageing Partner at DGC Business Consulting Ltd, a boutique investment consultancy specialising in agriculture investment and property investment.

David Garner is available for comment or discussion on david@dgc-ai.com or 020 7043 2592 or visit the DGC website to download the Agriculture Investment Guide at the DGC website.

As an individual we all have targets and set goals in our finances, hence adequate information to the right investment is very important. Considering the fact that good investments help us to actualize our objectives in our education, career, capital projects, family needs, etc, then it’s imperative for us to understand these investments.

Presently, we are faced with the recovery of the economy after experiencing the global economic meltdown for more than two years of economic impasse. In most African countries, especially Nigeria do not seem to get on a good start as the government has limited funds to inject into the economy (Capital market) unlike other developed nations of the world are currently doing. Therefore, there’s a need for us to make the right decision at this trying period. There are different types of Investments available to us; Savings, Insurance, Bonds, Equities and Stocks, FOREX, Real Estates, Importation and Exportation, and what have you. These may sound interesting, but we must look before we make decisions in our chosen investments.

For most people, making the right investment decision can be a tough one. They assume that you need enough money to venture into a lucrative business. It is always a good idea to do some research before you can make a decision as to what you want to invest in. This is better achieved the most when you gather information on your type of investment because you want to make the right investments that would work best for you. It is financially wise for you to know the investment basics so that you will be in a position to have variety of choices. Is this where the use of funds comes in? It is advisable that you use your savings especially if you plan to invest in long term. Moreover, you do not need a lot to get into investing though; you can use your monthly savings and investing consistently. The Stocks and shares option is one of the most popular and profitable business.

Also investing in Insurance policy is another guaranteed way of investing without having fear for drop in market price. Unlike the stock market, Insurance is a sure way of getting your money back with a certain accumulated interest over a stipulated period of time that is if there have not been any occurrences before the maturity date. This however, would be discussed exclusively in my subsequent articles.The mutual fund investment option is yet another form of investing whereby organizations collect money from different individuals and use it to venture into suitable quoted company stock at the right time.This reduces your risk of losing money since you are not directly investing in the stock market. You should look out for all loop holes and engage the services of a financial expert to help you make suitable investment choices.

Before we delve into the various investments stated above properly, there is a need to highlight the basic Principles of Investments that would be our guide to a successful venture. I shall discuss 5 of these proven principles that would guide us through;

The first investment principle we must know is to get the foundation right of any investments plan and all the hiccups we envisaged or encountered would be checked. The problem most people have is that they try to solve their challenges from the surface. It is easy for one to quickly take a pain relieving tablets to stop his toothache problems without knowing the cause. Alright let’s look at our business transactions as an instance. A growing businessman borrows money from his fellow business men to build his business venture. By doing this overtime he became heavily indebted. But in order to be free from his indebtedness, he quickly pays his debts without ever considering the fact that his greatest weakness could be poor financial (money) management. In Nigeria today, an average 60 percent of the population are into entrepreneurship in one business or the other yet most of them have little idea of their venture which accounts for low returns in profit every quarter. This dismay performance could only be attributed to their poor knowledge of the said business, hence the business foundation is lacking. In addressing such situations, understanding the roots of these investments
would place us on the driver’s sit to know where and how to make great returns on our investments

The second principle simply tells us to set values in our investments’ plan and life goals generally as a yard stick to take us to our desired expectations. Values are internal anchors we set ahead of time to guide us in time of decisions making. It is also important to note that in our individual offices and business places, values we set for ourselves would determine the future and success of our careers and business ventures. According to Hamel, G. in “Rethinking the basis for Competition” in (Gibson, R (ed) Re-thinking The Future, Nicholas Brealey Publishing, London pp. 76-92 he says that “the big challenge in creating the future is not predicting the future. Instead, the goal is to try to imagine a future that is plausible – a future that you create based on values.” As matter of fact, we must place great values on our investments and businesses for it to grow beyond limits.

On the third principles of investments, we must draw out our investments plans and strategy. One does not expect a high dividend as a return on your investments from a quoted company if you don’t invest well on that company. In any investment we do, there is need to know the strategy to adopt in getting good returns. Let’s look at the stock market for instance, you would not be foolish to invest in First Bank PLC in the Nigerian Stock Exchange that has reached its’ bullish state when you know most investors are bailing out after a period of planting then smiling to the banks for a good investment. You have to understand the investment first (foundation) then adopt a particular plan or strategy that would suit it for a stipulated period. That is why; Sun Tzu, great author, posits that “the General who wins the battle makes many calculations in his temple before the battle is fought while the General who losses make but few calculations beforehand”. You should know that whatever plans or strategy you make does not really guarantee you success as it may not suit the kind of investments you are into but get the right information to guide you through. Hence, you are advised to invest in financial books, business tips or any investment instruments to put you ahead of your contemporaries. By doing this, you must have drawn an investment philosophy that includes your; aim, period, returns and interest of your investments.

The fourth Principles would centre on our spiritual strength in business. Knowing that sometimes we face all sorts of problems and setbacks in our investments or business activities, we may not have the physical power to overcome them. To be realistic, we need to look up to God by committing our businesses in His hands irrespective of our religion or faith. According to the Book of Proverbs; “If God can see everything in the world of the dead, he can also see in our hearts.” If we commit our ways to God, He would direct our paths. We should always seek Him when faced with any problems. I also suggest you renew your minds with great spiritual and inspirational materials. Great authors like; T.D. Jakes, John Mason, Joyce Meryce, Mathew Ashimolowo, Dale Carnegie, etc have wonderful works that can nourish our soul and make us achievers even in the face of adversity. You would find out that what you consider as problems are not problems, but some stumbling blocks you encountered as challenges to your road to success.

The last Principles of investments which is the fifth, has to do with you as an individual. As a child while growing up, we all aspired to be one great professional in our chosen field. That’s the reason why Education could be adjudged as the highest form of investment. I must say that that most professionals or CEOs these days don’t utilize five percent of their brain. With the latest technologies at our finger tips, we seldom use our brain to work even getting the least calculations. Knowledge they say is power. The more knowledge we acquire, the more resourceful we become in affecting our lives positively. We have to invest in ourselves to improve on our business ideas and skills as change is inevitable. To buttress this point, let’s look at Romans 12:2; “and be not conformed to this world, but be ye transformed by the renewing of your mind that you may prove what is good and acceptable and perfect will of God”. Please make it a habit to invest huge part of your income on your brain and mind, as it’s such an investment that you would receive a 100% returns.

Remember, knowledge is part of the key to all successful businesses. Follow these basic principles of investments guide and you would be amazed how your business would grow in greater profits.

The best investment strategy still involves investment in stocks and bonds, and mutual funds are still the best investment options for most people investing on their own. Now, where do you find the best funds to invest in?

In order to put together your own best investment strategy you will need: access to a variety of investment options, diversification, and a low cost of investing. All three of these requirements can easily be satisfied and simplified if you invest directly with the right fund companies. That’s where you can find the best funds for your money, plus good service free of charge.

Let’s start with the need for a variety of investment options to choose from. Both stocks and bonds come in many varieties with varying degrees of risk. With mutual funds you can be conservative or aggressive in both investment categories by simply choosing funds that agree with your risk tolerance. For example, shorter-term bond funds are much safer than long term bond funds and could be the best funds for the conservative investor in search of higher interest income than is available at the bank. Each fund states its objectives and is rated for relative risk.

Now let’s look at diversification in putting together your best investment strategy. Diversification is the key to long term investing with less risk, and is the signature of mutual funds. Instead of managing your own list of dozens of individual stocks and bond issues, you can be instantly diversified and own a small part of a large portfolio of stocks and/or bonds with a single mutual fund investment. Plus, your investment will be professionally managed for you, usually at a reasonable cost.

In uncertain times like today, don’t overlook the importance of keeping investing costs low in your investment strategy. Some of the best funds today come from some of the lowest-cost and largest fund companies in America. A higher cost of investing can lower your net profits significantly. The two largest mutual fund companies in America are Fidelity and Vanguard. Both offer low-cost funds called no-load funds that have no sales charges (loads) and lower than average yearly expenses.

Where can you find these best funds for your money? Simply get on the internet and search “no-load funds”. The major fund companies that offer low-cost funds will be at your fingertips. Visit their websites and request free information. If you have questions call them toll-free. I’ve personally steered dozens of friends, family, and former clients in this same direction without a single complaint.

A retired financial planner, James Leitz has an MBA (finance) and 35 years of investing experience. For 20 years he advised individual investors, working directly with them helping them to reach their financial goals.

Jim is the author of a complete investor guide, Invest Informed, designed for average investors or would-be investors of all levels of financial background and experience. To learn more about investments and investing and his new financial guide go to http://www.investinformed.com.

Finding the best agriculture investment can be tricky for the inexperienced investor with little or no knowledge of the sector, but there are of course many different options available including agriculture investment funds, direct agricultural land investment, and purchasing equities in agricultural companies. In this article I will go some way to explaining the different options, the risks they present to investors, the mechanics of how each type of agriculture investment works, and the returns that are currently being achieved. You can also download a complete agriculture investment guide at the link at the bottom of this article.

Firstly we will look at the relevance of agriculture investment for the current economic climate, and whether this particular sector shows us the signs of being able to generate growth and income.

The Current Economic Climate

The global economy is still in a state of turmoil, and the UK in particular is cutting back public spending to reduce an unmanageable national debt, the population is growing, and quantitative easing is likely to lead us into a period of extended inflation. Also, the lack of economic visibility means that it is very hard to value assets such as stocks, and interest rates being so low means that our cash deposits are not generating any tangible income to speak of.

So what does this mean for investors? It means that we need to buy assets that have a positive correlation with inflation i.e. they go up in value quicker than the rate of inflation, these assets must also generate an income to replace the income we have lost from cash, and finally any asset that we purchase must also have a strong and measurable track record.

It is very clear that agriculture investment, especially investing in agricultural land, displays the characteristics of growth, income, a positive correlation with inflation, is easy to value, and has a clear and evident track record to analyse, and as such agriculture investment ticks all of the relevant boxes to potentially become the ideal asset class for investors today.

Agriculture Investment Fundamentals

The fundamentals supporting agriculture investment are pretty easy to measure; as the global population grows we need more food, to produce more food we need more agricultural land as this is the resource that provides all of the grain and cereals that we eat, and all of the space to graze the livestock that end up on our plate. So we are dealing with a very basic question of supply and demand, if demand increases and supply can’t keep up, the value of the underlying asset increases, so let’s look at some of the key indicators of supply and demand for agriculture investment.

For seven of the last eight years we have consumed more grain than we have produced, bringing the global store down to critical levels.

Since 1961 the amount of agricultural land per person has dropped by 50% (0.42 hectares per person down to 0.21 hectares per person in 2007).

The global population is expected to grow by 9 billion by 2050.

Most think tanks and experts believe that we will need to increase the amount of agricultural land by 50% to support that growth, essentially a productive field the size of greater London need to be found every week.

In the last ten years virtually no more land has been bought into production as climate change, degradation and development and a host of other factors mean that there is little or no more new land we could use to farm.

The underlying asset that produces our food, the land, will become more valuable as more people demand food.

Agricultural land value rise when the food it produces can be sold for a higher price, making owning farmland more profitable, and food prices are at a 40 year low, leaving room for around 400% price inflation. In fact a bushel of wheat cost around $27 in the early seventies and now costs just $3.

Farmland in the UK has risen in value by 20% from June 2009 to June 2010, and 13% in 2010 alone according to the Knight Frank Farmland Index.

So the fundamentals supporting agriculture investment are sound and very clearly demonstrate a good picture for potential investment. But can we absorb price inflation? Well there are a myriad of studies that tell us very clearly that as a population, we absorb increases in food prices almost 100%, and sacrifice spending in other areas, so yes, we can.

Methods of Agriculture Investment

Agriculture Investment Funds

There are many types of agriculture investment funds to choose from, most invest in farming businesses, other purely in arable land, and others by stock in agricultural services companies. Most agriculture investment funds are showing excellent growth, and the fact that they are buying has increased the level of demand in the market therefore their mere presence is contributing to capital growth. Rural agent Savills recently commented on the fact that they have access to £7 billion in capital from fund to purchase farms, that is enough capital to purchase six times the amount of farmland that will be advertised in the UK this year, in fact, according to Knight Frank there has been 30% less farmland advertised this year from last, and buyer enquiries have increased by 9%.

To talk about risk for a moment, the risk involved with this fund based investment strategy is that you give over control to a fund manager who will spend your money for you and acquire assets that he or she believes are relevant. Also, if one fund performs badly, that usually has a knock on effect for other agriculture investment funds as confidence in this particular strategy takes a hot, you can therefore lose value through no fault of your own. You also have to pay a fund management fee, eating into your profits.

In terms of the returns one can expect from a fund, this varies wildly but most project annual returns of around 10%, although this will vary depending on a whole host of factors including the fund management, investment strategy, and general market conditions.

Buying Shares in Agricultural Companies as an Agriculture Investment

Another option for chose considering cashing in on agriculture investment is to purchase shares in an agricultural business, be that a farming business, or a services business, the options to consider vary wildly and careful thought must be undertaken to pick a suitable market (LSE, NASDAQ etc), and then a suitable company in which to invest. The business of picking shares remains, in my opinion, a job best left to those with the time, experience and resources to carefully research the company, its management, and it product line, and only those company displaying sound fundamentals should be added to a portfolio.

The risk here is as with any equity based investment, a down-swing in the market can cause a good company to lose value and thus affect the wealth of the investor in a negative way. We have all seen recently how a bear market can bring down profitable companies and the whole premise of agriculture investment is to avoid financial markets and add an element of non-correlation to a portfolio, ensuring the investor owns an asset that is unaffected by volatile stock markets.

So does an agriculture investment in the form of shares fit the bill? Well not really, as we were looking for stability, non-correlation, a positive correlation with inflation and income, and this mode of agriculture investment ticks none of those boxes other than a nominal dividend.

Buying Farmland as an Agriculture Investment

In my opinion the most sensible strategy for investors is to acquire profitable farmland that has a track record of producing an income yield, and rent that land to a commercial farmer. This mode of agriculture investment allows the buyer to access an asset that displays all of the characteristics that we are looking for, non-correlation with stock markets, positive correlation with inflation, income and growth, as UK farmland continues to increase in value yet is still only half the price of agricultural land in Ireland, Denmark and the Netherlands, leaving a huge margin for future growth.

There are of course a number of risks to consider here as well, sourcing good land for example, and of course sourcing and managing a farming tenant, these risks can all be managed effectively by partnering with a specialist agriculture investment consultancy that will handle the sourcing of both land and tenant and also handle all ongoing management too.

So to summarise, if one is to make an agriculture investment, the best option right at this moment is to buy agricultural land, giving the investor growth and income in a volatile market.

To download the complete Agriculture Investment Guide click here.

Download the Agriculture investment Guide at http://www.dgc-ai.com

DGC Business Consulting Ltd source and manage farmland, residential property, and commercial property for investors, as well as provide research and due diligence for asset acquisitions across Europe.

HYIP which stands for High Yield Investment Program is just what it sounds like, is a type of investment program that yields high return rates ranging from 5% to as much as 250% per month. HYIPs are offering probably the most profitable investments available today, much more than any bank or investment fund. HYIPs claims that they can provide high interest rates by utilized your invested amount in forex, offshore trading, stock exchanges, soccer betting, commodities, etc. Some of them even work out the invested amount in other HYIPs and share the profit with you.

HYIPs can be divided to on-line and off-line investments. Off-line HYIPs are usually not available for common investors, their minimum of deposit is about $100k and more. Therefore, we will direct our interest to online-based investment opportunities. Investors invest in these online-based HYIPs via their websites using e-Currency, such as Liberty Reserve, Perfect Money, Alertpay, etc. The interest will be paid on daily, weekly, bi-weekly, monthly or yearly basis depend on their investment plan into your e-currency account.

Since you don’t have to do any kind of activity to gain the interest, investing in HYIP means a passive income source where you just sit back and waiting the money coming to you. However, this passive income system is associated with a huge range of risks, because most of these HYIPs are short-lived and are just Ponzi schemes. These schemes appear very attractive due to their promise of high interests. Ponzi schemes do not have revenues because the money collected from investors was not really invested. Note that if you invested in these Ponzi schemes there is no way to get back your money once you are scammed. Although this kind of investment is quite risky HYIP programs are getting more participants by the day and every so often another HYIP program is launched. Many investors have succeeded earning fortunes virtually overnight because an experienced HYIP investor can easily spot out bad scam HYIPs. Besides, good HYIPs also exist and may live long enough (for years), those people who began dealing with them from the beginning make huge profits.

Let’s consider an imaginary HYIP that offering the investment plan below:

Interest: 1.3% daily for 30 days
Min deposit: $10
Max deposit: $10000
Compounding: Available
Principle return: Yes
Referral bonus: 3%
Withdrawal: Automatic
Payment methods: Liberty Reserve & Perfect Money

Let’s say you have invest $100 in this plan, then this particular HYIP will pay you 1.3$ daily for 30 days. In other words, you will be paid total 39$ (net profit) and your 100$ principle return to you once your investment matured. If you choose to compound all the paid interests (reinvest), then you will be paid 147.33$ at the end of the investment term (net profit: $47.33). (Note: You can always use the HYIP calculator to calculate the profit for any investment plan) The minimum and maximum deposit that can be made is $10 and $10000 respectively. The withdrawal system of this HYIP is fully automatic, thus the daily payment is made automatically into your e-Currency account. The e-Currencies accepted are Liberty Reserve and Perfect Money. Besides, you can earn extra profit in the referral system, if somebody invests in this HYIP by following your unique referral URL then you will be given referral commission of 3% calculated on the amount invested by this new member.

Investment is always invariably associated with risks, HYIPs are not exemptions. There are new programs opening everyday but most of them are short-lived and are just Ponzi schemes. The lifespan of HYIP scam/ Ponzi is depending on how long the program is able to seek for new deposits. The moment new deposits stops, the program gone. Therefore your investment is quite vulnerable to getting scammed! However, HYIP can prove to be profitable if invest in it wisely. But be very careful if you’re interested in this type of investing opportunity since it can also lead to big losses. If you are really serious in being involved in a HYIP, you must always be ready to suffer a scam attack and that’s why you are always being advised to not invest more than you cannot afford to lose. Note that you cannot either complain your e-Currency authorities or suit the HYIP owner because your lawyer would charge you more than your invested amount. As a conclusion, investing in HYIP is actually like gambling! You are most likely a gambler instead of a investor. The difference is that if you invest wisely then your chances to profit would be higher.

Always conduct a thorough research of the company before you getting involved in and keep checking the paying status of the company via HYIP monitor.

Exchange traded funds have become the newest investment fund ever since the year of 1993. These trade funds have an easier and better trading option and are definitely more diverse when it comes to portfolio management. They are more convenient and definitely have more added benefits. Since then until this very day, the investments made to the ETF has increased to about two hundred and fifty billion dollars.

Exchange traded funds are in tune with a particular country or a company from a particular country. ETFs are different from mutual funds in the way they are traded. They are bought and sold via a stock exchange just like a company’s stocks and bonds. ETFs, unlike stocks, are traded through the whole day and are not kept available only at one given point of time. These are traded depending upon their demand and supply, unlike other investments that are based on the funds’ contents.

To many investors, bonds may not be the most exciting of ways to build ones portfolio, but it surely is looked upon as a reliable measure. Exchange traded funds on the other hand are more popular and its popularity is gaining much importance in today’s market. If you are a person who wishes to have more excitement and reliability at the same time, then it is time that you looked at the ETF bonds. Since its inception, in the form of assets in ETF bonds in December 2004, the investments to such bonds have gone from $8.5 billion to more than $90 billion over the past few years.

Unlike other bond funds, an ETF bond has better transparency. The true value of the ETF bond along with the possibility of trading them in the public market makes them even more appreciated. These bonds also have a very smaller fee attached to them. Commissions are also deducted every time you buy or sell an ETF bond, but unlike other bond funds, these commissions need not be paid if fund trading happens for a longer duration of time.

As an investor, you need to remember that investment strategies and investment products differ from one investor to another. Just like all other investments, ETFs too have their own benefits and drawbacks, but overall, this would be that investment tool which provides total transparency along with the other characteristics of a bond.

Darius has been writing online for a while now. He has a wide range of interests and topics that he likes to write about. You can check out some of his websites at http://www.daliteprojectionscreen.org and http://www.citronellabarkcollar.net

Trust deed investing has been around for many generations, yet today it seems few people are familiar with how it works or how it compares to other investment options. The economic signals today are mixed and confusing, and investors are understandably unsure about what to do. Invest or sit on cash? Invest in what? Trust deed investments offer one of the best opportunities, and risk-adjusted yields, available today when compared to the other major alternatives: stocks and private equities.

Trust deed investments are among the best risk adjusted yields available today.

First let’s understand the inherent value of risk-adjusted yield. Simply put it is the return potential of a given investment relative to its risk, where the risk is generally measured by volatility. Commercial trust deed funds historically yield consistent returns in the 9%-12% range annually, with very little volatility. Other assets, say small cap stocks or funds for example, have the potential for much higher returns but with much greater chance of loss as well. So the commercial trust deed fund would have a higher risk-adjusted yield.

Stock Market

If we now look at the major stock market indexes and compare them to commercial mortgage funds we see how this pattern plays out. The chart shows three major stock market indexes versus the lower end average of commercial trust deed funds. While there are slight variations among the indexes they all follow a similar path, and all show a lot of volatility. It’s interesting to note that this particular chart shows the stock market during the best part of the recent economic bubble, and stops before the market imploded in August of 2008. While there are periods where the market outperforms trust deeds it is impossible to time the market perfectly, and as we’ve all painfully learned recently those profits can disappear quite literally overnight.

Another important distinction is the collateral behind the investment. Theoretically an equity holder’s investment is backed by the company’s assets, but in reality your capital can disappear into the wind. (Just ask shareholders of Lehman Brothers or the Madoff funds.) Trust deeds are backed by valuable, and tangible hard assets: real estate. While real property can and does drop in value it is not subject to the minute-by-minute trading of wall street, and most real estate will always have some economic value. If the private money lenders do their job right there is ample collateral backing every trust deed investment. And don’t forget, when things go bad the lender (trust deed holder) is first to get paid, but the equity holder stands at the back of the line.

Private Equity

Private equity is exactly what it sounds like: investing money directly into a private company in exchange for an ownership stake. The attraction, of course, is that these mostly smaller, early stage companies offer the chance for eye-popping profits if and when they become successful.

Of course, that’s a big IF. Truth is most of these companies fail, or at least fail to achieve any sort of real value. On top of which investing in private companies is a tremendous amount of work and generally requires significant expertise. This is why it is mostly done through private equity or venture capital funds. (We’ll ignore Angel investing for the time being.)

So what about those eye-popping returns? Well, private equity and venture funds operate on basic portfolio theory. That is, out of every 10 investment about 6 will go completely bust, 4 or 5 will do ok and 1 or 2 will knock it so far out of the park that the fund overall provides a decent return. Nothing wrong with that if you have the stomach for that level of risk. Think of it as the extreme sports of the investing world. In fact, the amount of money required is so high and the risk so great that this is generally an investment class relegated to institutions and the extremely rich.

Stocks, bonds, mutual funds, and even private equity can be valuable tools in your investment toolbox. But the familiar, understandable, reliable and secure commercial trust deed fund should hold a prominent role in most investor’s portfolios.

Robert Purnell is President and Founder of Shepherd Capital Partners Inc., a commercial and private-money lender and trust deed investment manager with expertise in special use assets. For the past 15 years, he has been arranging financing and underwriting acquisitions on traditional commercial real estate and other special-use assets such as churches, senior housing and assisted living, medical facilities, self-storage, gas stations and more. You can learn more about Shepherd Capital Partners at http://www.shepherdcapitalpartners.com or call him at (415) 464-1004.

Copyright © 2008-2010

When it comes to investing, most of the people may think of the size of the amount needed to kick off with an investment. The common perception of investment is “I need a lot of money before I can even think of investment”. This statement may not be true as there are always ways to invest if you do not have much money in hand.

Now, if you have $1,000 to start with, where should you put the money?

1. Pay Down and Pay Off Your Non-Mortgage Debts
The first and the wisest way is to pay down your debts, especially credit cards debts. It is unusual for investment returns to beat credit card interest. Therefore, if you have $1,000 in hand, you should think of paying down your debts first, until they are fully paid up.

2. Create Emergency Fund
After you have paid up the non-mortgage debts or you simply do not have debts, then the next step is to create your emergency fund. An emergency fund is served as a back up should something out of your expectation happens, namely lay-off. You need to save up to an optimum level of between 3 to 6 months of your monthly expenditures.

3. Identify Investment Tools
When you have another $1,000 again, start looking for mutual funds to invest. It is not a good idea to invest in individual company’s stocks. You need more than 10 stocks in your portfolio to reduce the risks of deficit returns.

4. Select the Funds
How do you select the funds? There are too many funds flooding the market and undeniably some of them are underperformed. So the best way is to follow the fund managers and not the funds. Get a fund manager with high reputation of beating the market consistently. However, also take note that with $1,000 to invest, you may be limited to certain funds with low minimum opening balances.

Ng Chung Mun is an expert in life planning, specifically in individual risks management. For more on life planning and mutual funds investment, visit http://www.101lifeplanning.com/investment/3-main-different-types-of-mutual-funds-to-choose-from.php

Would we have invested in that project and released the funding ahead of closing if we had fully considered the financing risk on its own? Would a dispassionate review of the closeability of the financing caused us to forgo the investment? What would our view of returns have been if we had focused on the issues the revenue plan alone offered? What would our view of their expense estimate had been had we trained our analysis on the set of costs alone?

A useful and yet little attended part of the investments is a pure risk analysis. I advocate that as principals creating investments and investors placing capital in investments. That we should add a step to our analysis. I suggest a good term for this is the “Risk Focus Analysis”. In business school, they teach reviewing each alternative and placing a probability of success on that alternative along with estimating its value. Using this technique you are advised to make a choice for your action plan. Unfortunately, this view is in my opinion over simplistic. Instead, I suggest modifications to this approach. First, for plan alternatives that match the business school scenario take the following steps.

Describe the choice(s) you are making and the anticipated results.
Determine their value.
Determine whether there are “events” in the chain that can cause the plan to fail.
Determine the probability of success.
Assign the value based on the probability.
Make a decision based on the “failure events” to keep the option in the list or not.
Choose from the remaining alternatives.

Considering further, many projects don’t really lend themselves to this “alternative analysis” process. Instead, we are looking at an investment project and evaluating its executability and expected profitability. For these cases, a process to determine whether or not to invest and under what conditions to invest is needed. Rather than the simple brute force due diligence analysis let’s consider what our concerns are:

What is the risk that part or all of our capital be lost?
What conditions should we place on the investment to protect our capital?
What are the risks to the projected returns?
What are the risks to the exit plan?

With these items in mind, the investment risk analysis should help work out whether to invest or not and then under what conditions to invest or not. Also, as an investor or investment fund, this can determine basic investment protocols for agreements. To work these our investors should:

Define the issues effecting the potential safety of the capital including financing, guarantees, inventory, or working capital consumption for example.
Define the assumptions determining income.
Determine the assumptions determining expense.
Determine the assumptions determining capital purchases and their amounts.
Determine what issues create a risk of capital lost and if they can be avoided. Make a go / no go decision or place restrictions on the investment based upon this.
Determine assumptions that impact the potential returns and if they can be avoided. Make a go / no go decision or place restriction on the return management based upon this.

In all cases, if the restrictions and approaches become to complex, the investor should consider foregoing the investment.

If as investors we apply this view, we can significantly reduce our capital risk and strengthen our capital gain potential.

Blake Ratcliff (US Naval Academy Graduate & Marine Officer, Serial startup entrepreneur, COO/CEO, multifamily / residential investment founder, and property manager).

Visit http://internationalresidentialrealestateinvestorsassociation.org/real-estate-project-services-due-diligence-reports-business-plans

Trust deed investing has been around for many generations, yet today it seems few people are familiar with how it works or how it compares to other investment options. The economic signals today are mixed and confusing, and investors are understandably unsure about what to do. Invest or sit on cash? Invest in what? Trust deed investments offer one of the best opportunities, and risk-adjusted yields, available today when compared to the other major alternatives: stocks and private equities.

Trust deed investments are among the best risk adjusted yields available today.

First let’s understand the inherent value of risk-adjusted yield. Simply put it is the return potential of a given investment relative to its risk, where the risk is generally measured by volatility. Commercial trust deed funds historically yield consistent returns in the 9%-12% range annually, with very little volatility. Other assets, say small cap stocks or funds for example, have the potential for much higher returns but with much greater chance of loss as well. So the commercial trust deed fund would have a higher risk-adjusted yield.

Stock Market

If we now look at the major stock market indexes and compare them to commercial mortgage funds we see how this pattern plays out. The chart shows three major stock market indexes versus the lower end average of commercial trust deed funds. While there are slight variations among the indexes they all follow a similar path, and all show a lot of volatility. It’s interesting to note that this particular chart shows the stock market during the best part of the recent economic bubble, and stops before the market imploded in August of 2008. While there are periods where the market outperforms trust deeds it is impossible to time the market perfectly, and as we’ve all painfully learned recently those profits can disappear quite literally overnight.

Another important distinction is the collateral behind the investment. Theoretically an equity holder’s investment is backed by the company’s assets, but in reality your capital can disappear into the wind. (Just ask shareholders of Lehman Brothers or the Madoff funds.) Trust deeds are backed by valuable, and tangible hard assets: real estate. While real property can and does drop in value it is not subject to the minute-by-minute trading of wall street, and most real estate will always have some economic value. If the private money lenders do their job right there is ample collateral backing every trust deed investment. And don’t forget, when things go bad the lender (trust deed holder) is first to get paid, but the equity holder stands at the back of the line.

Private Equity

Private equity is exactly what it sounds like: investing money directly into a private company in exchange for an ownership stake. The attraction, of course, is that these mostly smaller, early stage companies offer the chance for eye-popping profits if and when they become successful.

Of course, that’s a big IF. Truth is most of these companies fail, or at least fail to achieve any sort of real value. On top of which investing in private companies is a tremendous amount of work and generally requires significant expertise. This is why it is mostly done through private equity or venture capital funds. (We’ll ignore Angel investing for the time being.)

So what about those eye-popping returns? Well, private equity and venture funds operate on basic portfolio theory. That is, out of every 10 investment about 6 will go completely bust, 4 or 5 will do ok and 1 or 2 will knock it so far out of the park that the fund overall provides a decent return. Nothing wrong with that if you have the stomach for that level of risk. Think of it as the extreme sports of the investing world. In fact, the amount of money required is so high and the risk so great that this is generally an investment class relegated to institutions and the extremely rich.

Stocks, bonds, mutual funds, and even private equity can be valuable tools in your investment toolbox. But the familiar, understandable, reliable and secure commercial trust deed fund should hold a prominent role in most investor’s portfolios.

Robert Purnell is President and Founder of Shepherd Capital Partners Inc., a commercial and private-money lender and trust deed investment manager with expertise in special use assets. For the past 15 years, he has been arranging financing and underwriting acquisitions on traditional commercial real estate and other special-use assets such as churches, senior housing and assisted living, medical facilities, self-storage, gas stations and more. You can learn more about Shepherd Capital Partners at http://www.shepherdcapitalpartners.com or call him at (415) 464-1004.

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