Feb 29 2012
Higher Returns With Entrepreneurial Investing
Long-term investment in the stock market can provide a passive return around 5-8% if they stay invested for 30 years, but unfortunately, that return is before taxes and inflation. This is so low because the company founders, partners, investors, investment bankers initials, etc., have removed all the expected return from the company before making an offer on the open market. There is a spectrum of investments available to you depending on the amount of effort you are willing to put in educating yourself, networking, and conducting their own investment due diligence. If you do not want to do any work, you will receive a refund of a tiny CD or a mutual fund in exchange for support to many people (in expensive suits) between you and the real business is making money. For people who want to educate themselves and put forth the extra effort, they will be seated at the table for business owners and managers, to invest directly in a business that pays cash benefits monthly or quarterly from 10 to over 20 %.
For example, suppose that there is one big family-rehabilitator in your area. This rehabilitation buy homes in poor condition, fixed up, and then quickly sell them for profit. If he or she were very good, I begin to take on multiple simultaneous projects or more until it runs out of money to buy houses again. Once they run out of money, start using your credit until you use up too. Once a successful businessman is out of cash and credit, the only way to grow is to partner with investors. To attract these investors, which offer higher average returns. [I want to make an important distinction between what I define as a "start-up" and a "going concern". A start-up is a few people who only have a business idea you want to spend their money instead of yours - do not invest in them! Leave these to the professional assessment of a venture capital firm. A going concern and is being directed by someone with professional current customers, suppliers, locations, products or services - these are the types of companies that want to invest in].
You can be both networking with local employers, educating themselves about their industries and the local economy, and checking the reputation of the people you are interested in becoming a member. Introduce yourself as someone who has been seeing its success, and indicate that you may want to invest in one of his future endeavors. It could be a business owner who has four retail stores and would like to invest with them to open its fifth store, or the owner of a local manufacturer needs some capital to start selling products abroad, or invest in a developer who divided large parcels of land into residential lots, or an investor that mortgage packages of private capital. There are many local opportunities for investment that offer investors greater control than the public purchase of shares, along with higher investment returns.
Direct ownership requires some skills that buying a CD or mutual fund is not required, but it will be well compensated for the development of these skills. The first skill to learn some basic accounting, because the financial numbers is the language of each business. You need the basics to start reading the financial statements to evaluate potential deals. If your desire is to invest in car dealerships, you need to know the difference between a career or a good dealer malfunction of the review of its financial statements. The next skill is the creation of networks to find offers – get your phone ringing, registration certificate, and the email account filled with possible deals. Private equity and debt financing is usually offered to family and friends, then acquaintances, and this will only happen if you are meeting people and talking about what you are looking for. The third skill is to conduct due diligence, which means that the independent verification of the extent possible on the individual, firm, and the transaction so that you can be reasonably confident that I paid in full. Few local private offerings will have a pamphlet written by teams of lawyers and accountants who have dissected the offer, so, personally, have to do the job. Whether it is a relative or friend, some people will steal your money and disappear or people who have good intentions but are unable to follow up and build a successful business. In any case, your hard earned money is a thing of the past that should have a big effort to get independent third party verification of all facts and history you can.
I personally know some people who have built their wealth with the high returns from private placement offerings, and not investing in the stock market due to lack of control and lower average rate of return. If you have the will to make the effort, great gains can be yours too.
