Where
The Smart Money's Going
Direct
Participation Programs
Preferred
Stocks
StartUps
NOTE:
This article should not be construed by the reader as containing or
offering any financial, investment, legal, tax or accounting advice.
Any financial computations, tables, projections, or statements are
presented for illustrative purposes exclusively. Global
Edge International Consulting Associates, Inc.
[GEI]
assists companies in creating and constructing their crowdfunding
campaigns. For further information regarding this, see
http://bit.ly/GEIserve
. This article is copyright 2015 by Douglas E. Castle, and it may not
be reproduced or republished without the author's express written
consent unless the article is reproduced in totality without any
changes or deletions, all links and images are kept intact and
functional, and proper attribution is given to the author of this
article and GEI.
With the increasing
incidence of high-volatility periods and “corrections” in the
publicly-traded capital markets, and with the low interest returns
being offered by well-rated banks and bond issuers domestically and
internationally, accumulating a small fortune (never mind about a
large one for now) through the traditional vehicles of “buy low,
sell high” in the stock market, or “ride the yield curve” in
the bond market has become feeble propositions. The risk-reward ratio
just isn't as inviting as it might have been during some long periods
of economic prosperity and market stability years ago.
Additionally, new vehicles
for investment, such as crowdfunding, peer-to-peer (P2P) financing
and other variations on these themes using the internet as a
surrogate exchange have opened up alternative means of investing
capital in microdoses with a built-in means of diversification by
simply spreading small investments over a large variety of
early-stage enterprises. That having been said, these
rapidly-proliferating investment vehicles and their accompanying
strategies have a great deal of inherent early-stage business risk,
but there is the inherent possibility of hitting several winners,
even if this occurs just randomly.
Some smart money rules are
listed below:
Rule 1: Diversify
your investment portfolio in industries which are not interdependent
and not correlated in terms of their pricing in the marketplace (in
whichever marketplace that you are trading);
Rule 2: Invest in
assets which offer you the possibility of gains (due to a rise in
market pricing), but which, first and foremost, generate a current
“cash-on-cash” return, in the form of interest, dividends, rents,
royalties or a flow through of profits. By way of a quick example, if
you invest in an asset which generates a 15.00% return per year, you
will have recovered 100% of your investment (without considering any
income made by reinvesting your 10.00% received yearly) within 6.67
years, after which time you effectively own your investment for
“free”;
Rule 3: Invest in
assets which are to be managed with a clear operating strategy, and
which are not dependent exclusively upon a future “exit strategy”
(such as eventually going public, being acquired by a large
conglomerate, etc.) for recovery of your invested capital.
Some smart money
opportunities (by type) are listed below:
Preferred Stock In
Established Companies: Preferred
dividend stocks, or preferred shares, are special equity securities
that are considered "hybrid" instruments. Although they
trade on equities exchanges, preferreds more closely resemble debt
instruments like bonds. Preferred stocks normally carry no
shareholder voting rights, but usually pay a fixed dividend.
These
stocks are generally not as volatile in their market pricing as
common shares, but they offer the holder a “cash-on-cash” return,
usually payable semiannually or quarterly. You don't purchase them
for capital gains... you purchase them for income and total portfolio
growth.
In the
current low interest environment where banks are paying interest
rates of less than 2% on deposits, there are some very stable
preferred stocks which are offering dividend yields (the fixed
dividend amount divided by the stock purchase price) of 6% to 7.5% –
this is between 3 and 4 times what the banks are offering. And when
the price of these stocks falls, the dividend yield rises. They are
the last bargains left in the public capital markets;
Stock
In Startups Bought Through The Various Internet Platforms:
These common shares are usually relatively low in terms of price per
share, but have some potential for significant capital gains either
in the private aftermarket, or if the shares become publicly-traded
on a recognized exchange. They are an outgrowth of the crowdfunding
movement which has become so big in the westernized nations.
The key
here is to buy a highly-diversified “basket” of these shares and
watch them grow. While each company (i.e., each issuer of stock) may
either rise or fall, with the usual incidence of risk, many of these
shares are priced so low that the least bit of good news will cause a
significant percentage rise in their market price.
And
while you can lose money on some of your individual picks, odds are
that your diversification in the “basket” will have it such that
the winners outpace, overshadow and compensate for the losers. Look
at each of these purchases as if it were a lottery ticket, but with
much better odds of winning;
Direct
Participation In Business Transactions And Their Related Investment
Opportunities: If you
have substantial wealth, you may choose to join an investment club or
partnership which invests directly in businesses in exchange for a
revenue-based royalty, rent, interest, or share of operating income
and certain incidental tax benefits in certain cases. These
investments are generally not loaded down with brokerage fees and are
not subject to market risk or volatility. The only risk is the risk
associated with the successful ongoing operation of the actual
business itself. You can learn more about direct participation
programs by clicking on the link which follows:
https://www.google.com/#q=direct+participation
, and you can learn more about investment clubs by clicking on:
http://bit.ly/CLUBS101
.
Regardless of what you
choose to do, know this: The Smart Money is trickling out of the
conventional investments, the customary exchanges and traditional
structures. That much is reasonably certain. And don't bother to take
that to the bank – banks that pay interest at rates which are lower
than the adjusted rate of inflation are ways of merely slowing the
loss of your wealth.
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Castle
Thank
you, as always, for reading me,
Douglas Castle
for Global
Edge International Consulting Associates, Inc.
and The
Global Edge International Blog
Please Join Me
On LinkedIn
THE GLOBAL FUTURIST – Douglas E Castle
http://theglobalfuturist.blogspot.com
Discovering and following significant trends across an extensive range of domestic and international consumer, business, demographic, cultural, economic, political, technological and other key areas of influence and impact on life and business; predicting future change, preparing for it and profiting from it.
Key Terms: business, forecasting, trends, future, prediction, disruption, displacement, innovation, complexity theory, economic waves and cycles, projections, planning
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