ReportWire

Tag: Investments

  • How to Prepare Your Portfolio for a Market Downturn With Real Assets

    How to Prepare Your Portfolio for a Market Downturn With Real Assets

    [ad_1]

    Opinions expressed by Entrepreneur contributors are their own.

    Forecasters are growing increasingly confident that a large-scale economic downturn is imminent. In a recent Bankrate survey, economists placed a 65% chance of a recession in 2023. Meanwhile, a mid-November American Association of Individual Investors survey showed nearly twice as many investors predict that the stock market will go down in the next six months than those who think it will rebound.

    One of the latest economic watchers to sound the alarm is Bloomberg, whose forecast models show a 100% chance of a recession. All this is to say that it’s nearly impossible to know exactly when a global recession will begin — or how long it will last.

    But while past performance does not guarantee future results, historical data can help investors predict how certain assets might hold up in times of turmoil. As we head into the New Year, here’s why you might want to consider real assets to help safeguard your portfolio from the uncertainty ahead.

    Related: 7 Investment Strategies to Follow During a Crisis

    Portfolio diversification

    Historically speaking, stocks and bonds tend to have a negative correlation with each other, meaning if stocks take a turn, bonds should still hold their value and vice versa. Typically, the two act as a hedge against one another. That’s not necessarily the case in today’s environment.

    Following the Fed’s decision to begin raising interest rates, coupled with growing fears of a potential recession, both stocks and bonds have experienced massive sell-offs this year. As a result, the values of both assets have dropped in tandem; year-to-date, the S&P 500 is down nearly 18% while the Bloomberg U.S. Aggregate Bond Index has surrendered about 13%.

    As two of the most common asset classes gear up to finish the year with net losses — which would be the first time since 1969 — traditional portfolios may be in for a painful drawdown.

    Across the board, investors are increasingly looking for non-correlated assets to help cushion their portfolios in times of volatility.

    Real assets, such as real estate, infrastructure and farmland, have historically low or negative correlations to traditional stocks and bonds, as well as to each other, meaning they are not often exposed to speculative trading in public markets. In the last three decades, farmland, for example, has had a -0.06 correlation to stocks and -0.24 to bonds, according to research from my own firm, FarmTogether.

    As a result, these assets can offer welcome diversification for investors looking to create distance between their portfolios and the markets.

    Capital preservation

    For nearly 30 years, real assets have provided similar or higher average annual returns than stocks, and with much lower volatility, resulting in historically higher risk-adjusted returns. From 1991 to 2021, average annual real estate returns had a standard deviation of 7.73%, while S&P 500’s was over 16%. Meanwhile, farmland’s standard deviation was just 6.75%.

    This stability is largely driven by a host of factors, including real assets’ intrinsic value, comparatively lower level of uncertainty around future cash flows and long-term structural trends driving values upward. The demand for necessities, like shelter, food and energy, for example, is inelastic, meaning it tends to remain consistent throughout the year. In turn, the value of these assets is not likely to experience swings like those seen with the markets.

    During the 2008 Global Financial Crisis, the Dow Jones dropped 54%. By comparison, gold values actually increased in value by 4%. Today, despite stocks and bonds both showing negative returns this year, the NCREIF Real Estate and Farmland indices have returned around 9% and 6% year to date, respectively.

    In addition to their physical value, many real assets have the potential to deliver passive income through operating or rental income. Global real estate has historically generated an annual cash yield of 3.8%, while infrastructure investments have yielded 3.3%. Farmland cash receipts from the sale of agricultural commodities are forecast to be up $91.7 billion in 2022, to $525 billion, a 21.2% increase from last year.

    Related: How Entrepreneur Millionaires Prepare for a Recession

    Hedge against inflation

    While inflation cooled to 7.7% in October, the inflation rate is not projected to return to the Fed’s 2% target until the end of 2025, with some econometric models still showing 3%+ inflation through 2024. With many signs pointing to continued inflation, investors may find refuge in real assets.

    The value of real assets is ultimately derived from their physical characteristics, meaning they’re more likely to retain long-term value than other, more traditional investments.

    But this unique quality of real assets is even more attractive when you combine the limited supply of natural resources with the rising demand from a growing population, which just topped 8 billion people last month. With stable supply-demand dynamics, real assets are well-positioned to increase in value year after year.

    Also, because real asset returns are inherently tied to commodity prices, which tend to move in lockstep with inflation, these investments have had a historically positive relationship to inflation indices like the Consumer Price Index (CPI). Simply put, when the CPI rises, so too should the value of your investment; over the last 20 years, real assets have historically outperformed traditional investments in inflationary environments.

    Preparing for a potential recession

    In an increasingly uncertain market, real assets can present an attractive opportunity for investors in 2023 and beyond. By expanding into real assets, investors have the potential to help spread overall investment risk, generate historically attractive returns and help hedge against persistent inflation.

    And thanks to the rise of real asset investment managers in recent years, investors now have access to a wide variety of investment channels and diverse opportunities.

    Related: What to Expect from the Markets in a Recession

    [ad_2]

    Artem Milinchuk

    Source link

  • 6 Overlooked Investment Opportunities in Commercial Real Estate

    6 Overlooked Investment Opportunities in Commercial Real Estate

    [ad_1]

    Opinions expressed by Entrepreneur contributors are their own.

    In commercial real estate, smart owners exploit every available opportunity to maximize their net operating income (NOI) and create new, leverageable equity. Over time, small changes can generate millions of dollars in cash flow and added value, which will be critically beneficial as you grow your CRE portfolio.

    Since transacting my first deal at age 18, I’ve built an 18-year track record of success as a professional CRE investor with the help and guidance of mentors who are legends in our business. Here are some of my favorite and most effective insider tips to help boost your numbers.

    Related: Tap Into the Wealth Potential of Commercial Real Estate With These 5 Tips

    1. ATMs

    Nearly every type of property has an area of 24 square feet that can be carved out with minor modifications. If you own property that has any commercial frontage or is located in a heavily trafficked pedestrian area, consider creating space for an ATM.

    In most markets in the U.S., average ATM space will typically lease for $500-$1,400 per month (as of the date of this publication) and requires an area of approximately 4’x6′. That is at least $6,000 in annual income for 24 square feet (or $250 per square foot).

    In areas with heavy pedestrian traffic, an ATM lease could bring $1,200-$1,400 per month, translating to an equity increase of up to $420,000. Talk to your local bank about placing an ATM in your location. Property owners may also choose to install an ATM machine of their own and collect fees on cash withdrawals, but such an operation requires hands-on management.

    2. Vending machines

    While the cash flow may seem negligible, vending machines can add a surprising equity boost to a property’s bottom line. Newer, more automated machines with card readers are more desirable. It’s easier to track income and profit with credit-debit purchases than with cash.

    You can either purchase machines or lease them. Monthly leases can begin at around $50 per month. For most products, profit is around 50%. With two machines, one for snacks and one for soft drinks, you could expect to sell approximately 300 items per month at an average profit of $0.75 per item. That’s a gross income of $225 per month and a net income of $125 per month (minus the $100 lease). While a net annual income of $1,500 seems hardly worth the effort, that’s a potential net equity gain of $20,000 for the property.

    There are many manufacturers that will either sell, finance or lease the equipment. If you choose to purchase or lease, there are reputable vendors offering state-of-the-art machines with favorable terms. Third-party vendors will also lease space in your property and handle all the stocking and maintenance for you.

    Related: How to Start Investing in Rental Properties — Your Step-by-Step Guide

    3. Coin-operated laundry

    In older apartment buildings without washer and dryer connections in each unit, property owners can potentially convert ancillary or otherwise unutilized space in the building (like a basement) into a coin-operated laundry facility.

    During the renovation of an old student apartment building close to NC State University, we converted an empty crawl space into a laundry room with four coin-operated washing machines and four dryers. I had 24 units in the building, most of which were two bedrooms, so approximately 48 residents. This simple amenity generated more than $1,000 per month. The extra $12,000 per year meant an instant equity gain of over $200,000.

    Most suppliers will offer financing or lease options for laundry equipment so you can get started with little capital out of pocket. Coin-operated washers and dryers can also be purchased from major home supply retailers, through Amazon or directly from equipment manufacturers.

    4. Parking

    I’ll give you a personal example: I purchased a church building a few years ago for $860,000. The building is 6,000 square feet and sits on a busy corner near lots of retail and where parking is scarce. I purchased it for the land value with the intent to demolish the building and develop a five-story mixed-use property. The existing building came with something unusual for the neighborhood: an underground parking garage with 21 spaces.

    Knowing the new development would take years, we rented out the parking spaces to pay the property taxes and carrying costs. With 21 spaces rented to nearby businesses at $100 per month per space, we generated $2,100 in monthly revenue, covering nearly half of the $4,500 mortgage.

    If we were to keep the building as a rental property, the extra $25,200 per year translates into $560,000 of additional equity in the building (at a 4.5% cap rate) — making up two-thirds of the $860,000 I paid for the entire property. While it may be difficult to purchase a standalone parking lot due to the demand for land, you can look for properties in infill locations that come with extra off-street parking. This additional revenue source can provide a welcome boost to your bottom line.

    Related: 6 Key Questions You Should Always Ask Before Investing in a Commercial Real-Estate Property

    5. Rooftop cell towers

    A cell tower requires as little as 50 square feet for installation. One rooftop tower can support as many as five carriers and 15 other digital antennas, generating up to $12,000-$15,000 in gross monthly revenue. That’s $6,000-$7,000 in monthly income on a 50/50 split with the supplier. The extra $72,000-$84,000 per year would result in an equity increase for the property of $1.4 million to $2.1 million, often with no out-of-pocket cost.

    Start by contacting American Tower, SBA and Crown Castle — the largest tower suppliers in the U.S. — to gauge demand for a tower on your property and try to get competitive offers. Most will structure their lease payments as a revenue split on the income from AT&T, T-Mobile, Verizon and other carriers.

    6. Freestanding cell towers

    Nearly all suburban developed properties have a 100’x100′ space where a freestanding cell tower can be placed. I’ve even seen some on footprints as small as 50’x50′. Dimensions, location and zoning are dictated by local ordinances, but if you can carve out a 5,000 to 10,000-square-foot section, a cell tower can potentially generate more monthly income than the property itself.

    Rental income or profit sharing on a traditional cell tower can range between $3,000-$8,000 per month based on population density. Even nominal income from a cell tower lease can have a major impact on your equity position and recapitalize in the event of a sale. As with rooftop antennas, cell tower installers and operators can tell you if there is a need for additional coverage where your property is located.

    This is the beauty of real estate: Small changes to cash flow create huge differences in property valuations, asset equity and the owner’s net worth.

    [ad_2]

    Nikita Zhitov

    Source link

  • What Is a Recession and How Do You Prepare for One?

    What Is a Recession and How Do You Prepare for One?

    [ad_1]

    The news is abuzz with rumors of the next recession coming in 2023 or 2024. But for most Americans, all of that triggers a sudden panic and a desperate need to look at one’s bank account.

    What is a recession, what does it mean, and how can you prepare yourself and your family’s finances for one? This article will answer each of these questions and more. By the end, you’ll know what to expect and how to prepare for a recession.

    What is a recession?

    According to economists working for the National Bureau of Economic Research, a recession is a prolonged period of economic downturn or declining economic activity.

    It affects a nation’s or the world’s entire economy and lasts for a few months or more. In some ways, the best way to understand the recession is to compare it to “regular” or positive economic activity and GDP.

    GDP (gross domestic product) is essentially the combined value of the goods and services made by an economy, like the American economy. The country’s GDP grows a bit each day/week/month in a standard economy.

    When a recession kicks in, there is no economic expansion. Instead, the GDP is negative — the value of goods and services in the economy decreases — for more than two quarters or approximately six months. People stop spending as much money when this happens because the dollar’s value decreases.

    Related: Are We in a Recession? Here’s What Economists Say

    This decrease in consumer demand triggers a decline in industrial production, exacerbating the spiral effect and making a recession last longer. A significant decline in the business cycle, characterized by many consecutive quarters of lower consumer spending, may lead to job losses or a high unemployment rate.

    Several past recessions have stalled economic growth and led to the depletion of the Federal Reserve or the “Fed.”

    These include the recession leading into World War II, the Great Recession financial crisis, which occurred in 2008 from speculation on real estate, and the most recent recession brought on by the Covid-19 pandemic and the necessary cutback/slowdown on retail sales in the U.S. economy.

    Signs of a recession

    Aside from this recession indicator, some typical economic indicators also have other signs and symptoms to pay attention to.

    These signs include:

    • More layoffs than average, a tighter labor market.
    • A general, widespread decline in stock market stock prices.
    • More businesses are going bankrupt than usual.
    • Fewer raises or promotions for workers.

    Related: Are We Headed for a Recession? It’s Complicated.

    As for GDP? According to some sources, the American GDP was -1.6% in the first quarter of 2022 and -0.9% in the second quarter of 2022. Technically, this means there is currently a recession, regardless of what people say.

    Note that a recession differs from a depression, which is much more severe. In a depression, the economy tanks significantly, and many more people may lose their jobs and money.

    In contrast, a recession is usually relatively short-lived. Some people may not feel a recession’s impact, depending on how much money they have saved up and their financial situation before the recession occurs.

    In any case, a recession is never good news, which could signify that you must prepare accordingly.

    How to prepare for a recession

    Fortunately, there are multiple ways in which you can prepare for a recession. Good recession prep can keep your finances secure until the recession recedes, allowing you to maintain your investments, keep your savings account intact and provide your family with peace of mind.

    Knock out as much debt as possible (and avoid new debt)

    Your priority should be to get rid of as much debt in your name as possible. You should already be trying to clear debt aggressively. The longer you leave it hanging around, the worse your credit will be and the more interest fees you’ll pay over time — it’s lost funds.

    As you put more of your money toward knocking out your debt, prioritize high-interest debt, such as credit cards and loans with high-interest rates. When you get rid of as much debt as possible, you set yourself up for financial success during the potentially turbulent economic times ahead.

    Avoid taking out any unnecessary loans or opening up new credit accounts during this timeframe. If you avoid further debt, you’ll have more money to spend on savings or necessities, which may be necessary soon.

    Related: How to Recession-Proof Your Business

    Keep saving aggressively

    Speaking of saving, you should continue to save aggressively or even save more money than you were previously.

    You might not get an unexpected promotion or pay raise during the recession. Even worse, your job could be at risk if you recently joined a company or are at the beginning of your professional career.

    In these cases and others, your income streams could dry up unexpectedly. If you save aggressively before that happens, you’ll be well-positioned to get back on your feet and weather this economic storm until clear skies return.

    Try to save as aggressively as possible and put that money into a secure savings account. That way, you’ll earn interest on those savings and avoid accidentally spending the money.

    Diversify investments

    Plunging numbers and red lines on charts are not reasons to withdraw all of your investments or blow up your portfolio if you’re invested in the stock market. You should keep your money in the market; after all, the stock market will eventually rebound just like it always does.

    Instead of panicking, diversify your investments by distributing your money into different stocks, funds, and other securities and assets. When you diversify your portfolio further, you protect it from economic damage, even from recessions.

    Plus, if you diversify your investments instead of withdrawing from the market, you’ll prevent yourself from losing money in the short term.

    Every time a recession occurs, some Americans invested in the market sell all of their securities, which only lowers prices for those securities. Then they regret this panicked decision as the market inevitably rebounds, with many stocks achieving higher prices than they reached previously.

    Bottom line: keep your investments in the market and keep your eye on the prize, particularly for long-term gains. A recession will eventually pass. Your current positions may be unattainable the next time you have money to invest in the market.

    Related: Worried About a Recession? Do This to Prepare Your Company.

    Bump up your credit

    Your credit score is also essential during a recession. You should improve your credit score before and during a recession whenever possible, primarily by eliminating high-interest debt such as credit card debt.

    If necessary, move any high-interest debt to a new credit card with an introductory 0% APR offer for any balance transfer funds. This can be an excellent way to quickly pay down any other debt in your name (in keeping with the tip above) without paying extra interest.

    In any case, try to improve your credit so you can take out emergency loans if necessary, and so any other fees or financial strain you face over the next few months, reduce your credit by as little as possible. Many people feel the aftereffects of recessions for years to come, primarily because it damages their savings accounts or credit scores.

    Don’t panic

    Do not panic if and when a recession occurs or when the news anchors start talking about it. Contrary to what some may believe, recessions are standard parts of the economic cycles inherent in capitalism.

    Simply put, recessions are inevitable declines in economic activity that eventually fade away. Once people stop panicking about the effects of a recession, economic activity should return to normal, and businesses will start to boom again.

    Just thinking of a recession in this light — a regular element of the economy and not something to necessarily be feared — will help you keep your head straight as you plan.

    Not panicking is crucial, so you keep spending and saving money, which are essential actions to do your part to prevent the economy from spiraling downward even further.

    Summary

    Recessions might be financially uncomfortable, but they are far from devastating if you take the right steps beforehand. The proper prep and patience will go a long way toward shoring up your bank accounts and protecting your finances throughout the upcoming recession until the market upswings again.

    Looking to expand your financial knowledge with more articles like this one? Explore more of Entrepreneur’s Money & Finance articles here.

    [ad_2]

    Entrepreneur Staff

    Source link

  • Fintech Funding: Teampay raises $47M in Series B funding round | Bank Automation News

    Fintech Funding: Teampay raises $47M in Series B funding round | Bank Automation News

    [ad_1]

    Purchasing platform Teampay raised $47 million in Series B funding earlier this month. The New York-based fintech is a spend management platform that allows companies to request, approve and track expenditures in real time, according to Crunchbase. Teampay will use the funding toward advancing its go-to-market strategy, expand its workforce and prioritize its recent partnership […]

    [ad_2]

    Whitney McDonald

    Source link

  • VCs Are Missing Out on New, Innovative Ideas. Here’s Why (and What They Can Do About It).

    VCs Are Missing Out on New, Innovative Ideas. Here’s Why (and What They Can Do About It).

    [ad_1]

    Opinions expressed by Entrepreneur contributors are their own.

    It has been a challenging time for technology investing. S&P and NASDAQ are down, and crypto is down considerably. S&P 500 declined by 19% earlier in the year, and NASDAQ, which is tech-heavy, has lost almost 30% of its value in the same period, with some of the biggest tech giants reporting disappointing earnings.

    The crypto winter continues with Bitcoin and Ethereum prices tanking following the collapse of FTX earlier this month, with around $200 billion being wiped off the crypto market in just days. It goes without saying that on the surface, it may seem like this is not a good time for tech investing, and many investors have indeed dropped their big tech stock in favor of “old economy” stocks. Still, could this be an opportunity to invest in companies with a discount?

    Related: 6 Important Factors Venture Capitalists Consider Before Investing

    Tier 1 wastage

    For large VC funds, investors are often looking to partner with startups that can achieve more than a $50B outcome in order to get a return of 3-5 times the fund. However, with only 48 public tech companies currently valued at more than $50B and over 1000 venture funds gunning for these few, this is a challenging situation.

    Furthermore, since VCs only typically take on 20 or 30 companies per fund, they often use “pattern recognition,” whereby they use experiences from the past to make more efficient decisions about current investments. However, what can happen is that their portfolio companies all look pretty similar.

    This can be problematic for entrepreneurs applying for VC funding who do not fit the “tried and tested” criteria many VCs use to decide whether to invest or not. In fact, we see that the majority of U.S. venture funding goes to white, Ivy-League-type entrepreneurs. In Q3 of this year, only 0.12% of venture funding went to Black entrepreneurs.

    Even if these startups have the potential to be the next biggest thing, their idea will struggle to get off the ground just because they cannot get the venture capital. Furthermore, VCs also stand to lose out, simply because they are only focusing on that small segment of startups and not on the potential of others that perhaps do not fit the bill on paper.

    Opportunity for disruption in the market

    However, while many VCs are focusing on targeting increasingly large outcomes, this provides an abundance of opportunities for what is left. By targeting the underfunded startups, you can invest in businesses that have an 80% chance of a $300M outcome and gradually move upmarket from there.

    Not only will this provide a funding opportunity for entrepreneurs who would normally have been seen as outside the box, but it can drive innovation and new ideas. Different people can solve different problems, so it stands to reason that funding a wider spectrum of people will create new, innovative solutions — potentially serving a wider, more diverse population.

    Related: How We Can Beat Venture Capital’s Diversity Problem

    A need for a change of perspective

    It is not that venture capitalists have made bad decisions or ignored critical data. They haven’t, but it is rather the culmination of multiple parties making rational decisions that have resulted in systemic levels of risk.

    If we look at U.S. venture performance, the majority of returns are generated by a very small subset of players, with the top 5% of funds significantly outpacing the median.

    This is also the case with startups, where you will usually have just one from the VC fund’s portfolio bringing in the overwhelming majority of the returns if not all. When successful, VCs can see a return of 5-10x of their money back, and founders can become billionaires.

    Yet, we now find ourselves in a post-Power Law meta, which opens up an opportunity for a new perspective and to start making new rational decisions. This shift has seen a substantial increase in both the VC fund count and value in the U.S., with 2021 proving to be a record-breaking year.

    Approximately $329B was invested across 17.054 deals last year, a record for both deal count and value. Investors also passed the $100B mark for the first time ever, raising $128.3B.

    How should venture work?

    However, although we would like to think that this influx of funding is going to the entrepreneurs who could not otherwise get funding, this is not the reality of the situation.

    A funding round in a startup will usually comprise 3-5 major funds and a variety of smaller checks putting capital in. However, a recent analysis by venture fund, Social Capital, has shown that there is a significant overlap of VCs co-investing with each other.

    Additionally, funds over $500M accounted for 77% of capital raised by venture funds in H1 2022, with an average fund size of $317M. The returns are predominantly concentrated on those few companies and a few key investors.

    Related: You Can’t Get VC Funding for Your Startup. Now, What?

    What is the solution?

    Many things can go wrong with startups once they have accepted venture capital, and they are typically left with two options: to shut down or pivot. Limited partners’ fund managers are generally not going to consider risky bets, opting to look for consistent winners within their allocation. Furthermore, you have to look at what would incentivize them to diversify when they have received huge returns over the past decade.

    Still, this provides an opportunity for an alternative product to invest in companies with limited fund size and equity optionality through redemption clauses or equity buybacks. As a serial entrepreneur myself, I have built multiple businesses in the last few years. Some failed, and a couple of them succeeded in multi-million dollar companies with offices on a global scale.

    Now as Co-Founder and Managing Partner at Venturerock The Valley, we aim to support startups from seed to scale and decrease the high failure rate for startups. We are not looking to sell products, but rather to focus on startups that create a big impact and really solve a problem using emerging technologies such as blockchain, AI and IoT. All our partners combined have accelerated more than 700 startups to date.

    While many still focus on the big few, they risk missing out on new innovative ideas and breakthrough technologies simply because they did not fit the mold. Even though these startups may not turn out to be the next $50B company, they can still bring great value to the table, be very successful and create a big impact. These companies deserve to be supported on their journeys and to see their visions come to fruition.

    [ad_2]

    Danny Cortenraede

    Source link

  • 7 Common Mistakes Made By New Real Estate Investors

    7 Common Mistakes Made By New Real Estate Investors

    [ad_1]

    Opinions expressed by Entrepreneur contributors are their own.

    Real estate is one of the safest ways to create lasting wealth, and it is attracting more and more people each year. Investing in real estate is an exciting and lucrative adventure, provided that you don’t fall into the pitfalls of the sector. The lack of experience of beginner investors can cause them to fall for many tricks. So, here are seven common mistakes to avoid at all costs if you’re a beginner who wants to succeed in the real estate industry:

    1. Thinking that you will get rich quickly

    One of the major mistakes beginner real estate investors make is that they often think that the results will be tangible quickly. That is the outcome of the internet phenomenon: The public wants everything right away and without making any effort. Many industry gurus focus their communication in this direction, and they do not show that in order to succeed, it is necessary to have a spirit of self-sacrifice and also to work hard. In reality, patience and perseverance are required in this type of investment. Just searching for a profitable property can take several months if you don’t have a keen eye. Moreover, rushing into an investment without checking the property in question is often a bad omen.

    Related: A Beginner’s Guide to the 5 Easiest Ways to Become a Real Estate Investor

    2. Not having a strategy

    Some real estate investors prefer to take projects one day at a time, without having a precise plan of action. In this case, the risk is to end up with several properties which do not correspond to their profile. These investors embark on all sorts of projects without measuring the consequences, and they often find themselves ruined because of their poor investment choices. Having a well-defined strategy allows you to go in a precise direction. Following a strategy means ensuring that you don’t venture out in all directions and that you move in the right direction.

    3. Focusing your research on a specific city

    Another major mistake often made by beginner investors is focusing on a specific city — often close to their home or in a particular city because they have been told that its profitability is good. In reality, this way of searching drastically reduces the opportunities since these investors will feel obliged to buy a property in that city, even if the profitability is not there. On the contrary, it is necessary to expand the search in order to not miss any opportunities. It is easy to optimize the profitability of a property that is already profitable beforehand. On the other hand, a property that is not profitable will harm your project, even if you set up some optimization strategies.

    4. Omitting the negotiation stage

    In real estate, negotiation is a key step that takes place at different levels. In particular, it intervenes at the time of purchase of the property. Many real estate investors forget that a good deal is made at the time of purchase. If they buy at a too high price, that will impact the profitability of their project, whether it is a rental or a resale project. The purchase price constitutes an important variable in a real estate investment project. Keep in mind that if you don’t get a good deal at the time of the purchase, it is very likely that you won’t get a good deal on the resale.

    Related: How to Avoid the Common Pitfalls of Real Estate Investing

    5. Underestimating the cost and the scope of the work

    It is important to seek the help of professionals when you are tackling work related to real estate because costs can quickly become overwhelming. Often, beginner investors have no idea of the scope of the work to be done, and therefore they underestimate their costs. They only have a global or a partial vision of what they want to achieve, and they do not realize that the work can be much more consequent.

    6. Not checking the condition of the property

    Even if virtual visits are at the present time facilitated by technology, seeing the condition of a property in person allows you to check if it corresponds to your expectations. There is no point that can be neglected at this stage. It is particularly necessary to check the state of the common parts as well as the state of the roof, for example, with the help of a drone in order to be more precise. While visiting a property, it is also important to check the condition of the neighborhood. All this is done in order to avoid very high costs of work.

    7. Thinking that you can handle everything yourself

    In the real estate field, beginner investors tend to think that they can handle everything, either to make a bigger profit or simply because they find it difficult to delegate some of their work. This is a common mistake, as the time spent in the management of a property is valuable time that they can allocate to tasks that are more within their reach, such as searching for other properties or finding some solutions to optimize the profitability of a property they possess. In some cases, delegating this responsibility to professionals is a better solution. But be careful, delegating does not mean not controlling. It is necessary to think of always monitoring the state of the work.

    Related: Master These 6 Skills to Succeed as a Real Estate Investor

    If you’re just getting started in real estate investing, use these tips to avoid common mistakes. Remember this: It takes time to see results, don’t go in without a strategy, don’t limit your search, don’t skip the negotiation stage, don’t underestimate the cost or the work, thoroughly check the condition of the property, and don’t hesitate to delegate the work.

    [ad_2]

    Xavier PRETERIT

    Source link

  • 6 Tempting Investments To Avoid

    6 Tempting Investments To Avoid

    [ad_1]

    Opinions expressed by Entrepreneur contributors are their own.

    As investors, we’re often told to be active and diversified. But are some investments not worth your time or money? Indeed, certain types of investments should be avoided at all costs. Here’s a list of common financial products and how they might affect your portfolio.

    1. Whole life insurance

    Whole life insurance costs substantially more than term insurance. Whole life premiums are typically much higher than term premiums, and the cost of whole life policies can be even higher for older individuals. It’s also important to note that since whole life policies cannot be cashed out, you can’t use them as collateral if you decide you need money from your investments in the future. Additionally, if someone dies before their policy expires (which often happens with whole life policies), their beneficiaries only receive a fraction of what they were expecting because of how much this type of insurance costs.

    In addition to these issues with cost-effectiveness and liquidity, whole life insurance also offers fewer death benefits than other types of investments due to its nature as an annuity contract instead of a mutual fund or stock portfolio; this means that there won’t be any growth potential after purchasing your plan which would otherwise come from investing in other funds or stocks over time.

    2. Low-interest saving accounts

    A low-interest savings account is an investment you can make with money that you don’t need to use immediately. Savings accounts are generally insured by the government and offer a slight interest, which is often lower than inflation. These accounts are not liquid, meaning you cannot withdraw your savings without penalty if you need them for something else. They also have high fees attached to them and may even charge high minimum balances if you aren’t putting enough money in there every month. Furthermore, since these types of investments don’t earn much interest on the cash inside them, they may lose value over time due to inflation.

    Related: How Generation Z Can Jump-start Savings (Advice Anyone Can Use)

    3. Penny stocks

    Penny stocks are low-priced shares of small companies that trade over the counter rather than through an exchange. They can be risky investments because they aren’t regulated by the Securities and Exchange Commission (SEC). This means that penny stocks are not required to follow the same strict rules as other investments, which makes them more likely to be scams.

    Penny stock investors don’t have many options for selling their shares — penny stocks typically don’t trade on any of the major exchanges where investors can sell them for cash. If you want to sell your shares, you’ll usually need to find someone who wants them badly enough that they’ll accept less than market value. And since most people have no idea what these “spare” shares are worth, it’s easy for folks posing as brokers who say they’ll buy your shares at an inflated price (or even just a flat rate) without even checking if there’s any demand for those particular shares on an actual exchange somewhere else in the world.

    Related: 5 Things Millionaires Do That Most People Don’t

    4. Gold coins

    Gold coins are not a good investment. They’re essentially just a store of value, like other precious metals. While some people may see this as an advantage in that it can be bought and sold easily (which is true), it does not generate income as stocks or bonds do — and it can also lose value if gold prices go down. If you want to buy something tangible, buy silver instead: It’s cheaper than gold on an ounce-by-ounce basis, has more industrial uses (such as being used to manufacture electronics), and has been less volatile over time than gold has been.

    Related: Why It’s Never a Bad Time to Invest in Precious Metals

    5. Hyper-aggressive growth mutual funds

    A hyper-aggressive growth fund invests in companies with high growth potential. These funds tend to invest in risky stocks, meaning they could quickly lose value if the company’s stock price falls or the economy goes into recession. The risks of these types of funds are twofold: first, there are times when the market will crash, and your investment will be lost entirely; second, even under normal conditions, you may see an overall loss over time because these types of investments tend to fluctuate in value more than other investments (like bonds). If you’re looking for an aggressive option with a chance of making some serious money, consider an aggressive growth fund instead.

    6. Complex private limited partnerships

    There are some types of investments you should avoid at all costs. One such type is a complex private limited partnership. These investments are dangerous because they often have hidden risks that can lead to significant financial losses. A good example is the Madoff Ponzi scheme, which ended with many investors losing their savings.

    Another reason you should avoid these types of investments is that they involve high tax implications, which can be challenging to understand and may require professional assistance from an accountant or other expert to comprehensively comprehend the tax laws governing them. Some companies may also try to sell you investment opportunities with very little information about what exactly it is that they’re offering. These products are often sold by unscrupulous individuals who will take advantage of people’s lack of knowledge about financial products to make quick cash off their victims’ backs without ever completing any work on their behalf (which means no profits).

    [ad_2]

    Christopher Massimine

    Source link

  • Where should you invest in 2023? ICICI Prudential AMC’s S Naren picks best bet

    Where should you invest in 2023? ICICI Prudential AMC’s S Naren picks best bet

    [ad_1]

    S Naren, ED & CIO, ICICI Prudential AMC says he is positive on debt as it has become an attractive asset class given the higher yields amid rising interest rates. He is also positive on manufacturing, healthcare and financial services when it comes to equities. In a freewheeling interview he shares with Business Today what will define the markets in 2023.

    BT: What is your big call on asset classes?
     

    S Naren: Given the widespread belief that investors should only participate in equities, the big call is that investors should also invest in debt. In India, credit has grown by 20 lakh crore over the past year, and the government has a net borrowing programme of 12 lakh crore, of which 6 lakh crore will come from the insurance industry and other sources. The banks must provide the remaining borrowing of almost Rs 6 lakh crore. In the meanwhile, the deposit growth is just Rs 15 lakh crore of the required Rs 26 lakh crore. So, there is essentially a funding shortage in the debt market. In the past, asset classes with low investor interest have performed well in the short to medium term. A similar trend was visible in telecom, metals and PSUs as well three years back. Investors were reluctant to invest in these sectors and those are the very sectors which have delivered robust returns now.

    However, given our call on debt, this does not mean that we are negative on equities. What we are saying is that we are positive on debt as it has become an attractive asset class given the higher yields amid rising interest rates. Also, debt is interesting based on the investment theory that one should invest in those asset classes which are facing a lack of investor interest. Here, investors can consider categories like dynamic bond, credit risk, savings, ultra-short for debt allocation requirements.

    BT: For 2023, what should be the takeaways for retail investors?

    S Naren: Our mantra for 2022 was about practicing asset allocation and being systematic with equity investing. Now, in 2023, we are continuing the same and have added that investors should consider investing in debt mutual fund.

    BT: Does this mean tilting asset allocation towards debt?

    S Naren: No, we are not asking investors to tilt their portfolios towards debt. Because of the low returns debt funds generated in the past, investors should not ignore the future potential opportunities that exist in debt funds. Over the last two years, retail investors largely opted for equity and hybrid funds. Barring debt index funds, there was hardly any net inflows into debt mutual funds. Apart from this, investors should continue with equity SIPs and stick to investing within the asset allocation framework.

    BT: Over last few years, the return from debt mutual funds was around 4 per cent. When you say invest in debt funds, what kind of returns should one expect going forward?

    S Naren: There is a better opportunity to generate risk-adjusted returns in debt today compared to the past three years. Before 2020, similar was the case with metals and PSUs on the equity side, with rates poised to rise, the debt outlook is set to improve.

    We also have to remember that between 2008 and 2021, we had 13 years of quantitative easing by the global central banks. During this time, corporate India could easily borrow at very low rates (close to zero) globally. Today, that is no longer the case given that banks have moved on to quantitative tightening and rates have risen. This would translate to corporates borrowing more domestically which is another reason debt becomes interesting.

    BT: What is your outlook on equity markets?

    S Naren: We believe India presents a very good structural story, stable economy, and hence is currently overvalued. Between large cap, mid cap and small cap, we are positive on large cap and flexi cap category at this point in time. Post the sharp selling by FIIs, large caps are better placed on valuation terms than mid and small caps.  Given this setup, staggered investing via SIP is likely to aid investors in their wealth creation journey.

    BT: From your basket of funds, what funds would you recommend to investors?

    S Naren: If one is investing through SIP then they can consider investing in aggressive categories like mid cap, flexi cap, value, special situation or small cap to benefit from the potential volatility in these pockets. On the other hand, if you are considering lump sum investment, then we prefer asset allocation oriented or hybrid category offerings given that equity markets are not cheap. Debt can also be considered for lump sum, particularly the shorter duration and accrual strategy schemes.

    BT: Going forward what strategy would you recommend? Will it be momentum or value?

    S Naren: It is tough to gauge whether momentum or value will deliver in the year ahead. At this point, we believe investors should focus on asset allocation strategies.  Three years back, value was very cheap which is not the case now. We believe that as the US Fed stops hiking rates, precious metals like gold and silver are likely to do well. We were of the view that this call will play out in a protracted manner, but some of the precious metals have already rallied significantly.

    BT: What themes are you looking at for 2023? Especially in the light of government’s focus on manufacturing?

    S Naren: We are positive on manufacturing, healthcare and financial services. From a 12 to 18-month perspective, we believe systematic investing in export-oriented themes like IT could deliver returns as recession fears would have abated by then.

    BT: Post the last Fed rate hike, RBI MPC is due this month. Do you think they will increase the rate or are we near the terminal of peak rates?

    S Naren: We expect rate hike by both the RBI and the US Fed in the next round of meetings. But after this, it remains to be seen how fast the central banks will raise rates going forward. In India we believe trade balance is more of a concern than inflation unlike the Western world. We could manage inflation better because India did not engage in excess be it in terms of either printing too much money or reducing interest rates to near zero. However, the slowdown in advanced economies and rise in oil prices is negatively impacting our trade deficits.

    Also Read: What makes HDFC Bank and HDFC merger a win-win bet? CFO S Vaidyanathan explains

    [ad_2]

    Source link

  • Black Friday Brings a Darker Outlook for Tesla

    Black Friday Brings a Darker Outlook for Tesla

    [ad_1]

    When Black Friday comes…. Steely Dan is dominating my mental soundtrack this morning. But, as I mentioned in my column earlier this week, I like to stay away from the herd. So, instead of focusing on mall traffic or Amazon Prime (AMZN) activity, I will focus on a much larger consumer base than the one in the U.S.: China.

    The People’s Bank of China reportedly will cut the reserve requirement ratio for most banks by a quarter percentage point by Dec. 5, which would pour in about $70 billion of liquidity into the economy. 

    I spend so much time on the energy sector that I have adopted its lingo. We always talk about the marginal demand for a barrel of oil. So, if we look at the global economy, China is counted upon to be the marginal demand for … just about everything.

    Yes, that obviously impacts oil, and the recent zero-Covid lockdowns in Beijing and other cities have indeed pressured oil via its Brent crude pricing benchmark. Brent is flat now at $85.30/barrel.

    But energy is still the best of a bad bunch of U.S. stocks. I saw the stat the other day that energy is the only one of the 12 S&P 500 sectors that has posted a gain thus far in 2022. Rest assured that I am not selling any energy names now, nor do I plan to before Dec. 23.

    But when I look at the Chinese consumer, I am focused on purchases of goods, not commodities. The first name that jumps to mind as a China Play is Tesla (TSLA) .

    China’s auto safety regulators announced yet another recall action Friday on older Teslas (models that were actually made at Tesla’s California facility). A terrible record on initial quality combined with a softening macro environment in China does not bode well for Tesla’s global growth prospects. Elon Musk knew that he had to grow where the marginal growth was in the global economy, so he opened Tesla Shanghai. But macro rules the micro, just as much in China as it does in the U.S.

    Earlier this year, the Insane Clown Posse of sell-side analysts that pretends to follow Tesla were climbing all over each other to raise forecasts for Tesla’s unit deliveries for 2022. The highest forecast I saw was 1.7 million units, but now, with a slower China and an awful Europe (Tesla opened a factory in Germany this year) it looks as if consensus is sitting at 1.35 million units delivered for Tesla in 2022. I think they will struggle to get to 1.3 mm units.

    Those unit delivery forecast declines were largely a factor of analysts lowering forecasts for Tesla’s deliveries in China. As delivery wait times mysteriously disappear on Tesla’s Chinese website, we can see that demand has dissipated there. The Model 3 is 5.5 years old and is no longer selling well in China (or anywhere else,) and the Y, while still selling well, is expensive for the average Chinese consumer.

    Tesla was painted as a China Play, and with China slowing so much that its Central Bank is throwing open the monetary spigot, look for Elon to continue to focus his energies elsewhere. As TSLA shares have declined by around 50% this year, I don’t blame him for doing so.

    (For some bonus content, and if you were understandably more focused on family and football yesterday than Brazilian financial media, this is my interview with Brazil Journal regarding Elon Musk, Twitter (TWTR) and Tesla that posted yesterday on that excellent site.)_

    Black Friday comes for everyone. Just make sure your portfolio doesn’t have one today, or any other Friday in the foreseeable future.

    Get an email alert each time I write an article for Real Money. Click the “+Follow” next to my byline to this article.

    [ad_2]

    Source link

  • 23 Days of Giving With Charitable Events Starting Dec. 1, 2022 Are Announced by P23 Labs, Renowned Molecular Laboratory

    23 Days of Giving With Charitable Events Starting Dec. 1, 2022 Are Announced by P23 Labs, Renowned Molecular Laboratory

    [ad_1]

    P23 Labs, a leading molecular laboratory, is kicking off its 23 Days of Giving series of charitable events running from Dec. 1 to Dec. 23, 2022. Three of these days will be dedicated to gifts to the company’s team members and 20 days are for charitable donations to causes from P23 and its partner, Laddia Whittier, who made a generous contribution to make this initiative possible.

    Press Release
    –

    Nov 23, 2022 11:30 EST


    SAVANNAH, Ga., November 23, 2022 (Newswire.com)
    –
    P23 Labs believes in giving back. Besides the 23 Days of Giving campaign, the company holds monthly giving events on the 23rd of each month. At least 3% of P23 Labs’ profits are given annually to the planet, community, and health equity.

    P23 Labs makes a difference in the lives of thousands of Americans who have the goal of keeping themselves and their loved ones safe. In this vision, P23 Labs is a household name and the healthcare laboratory of choice when it comes to taking charge of health. A recently launched P23 Health brand helps to achieve long-lasting well-being results, assuming, that healthcare is self-care. Besides, for underserved communities and those in need, P23 holds its monthly #BeGiving contributions in line with the company mission. It all makes P23 Labs acknowledged not only for its science-backed health and wellness solutions but also for being a mission-driven community player with meaningful values.

    “Our 23 Days of Giving is such a special time in our company, full of ways that we give back to our community, and spread holiday cheer. I love the feeling of making a difference in the lives of others, and P23 team embraces it and participates with open hearts and warm smiles. I can’t wait to see the good that we accomplish,” Dr. Tiffany Montgomery, Founder and CEO of P23 Labs. “We would like to give a special thank you to Laddia Whittier for demonstrating our core value of BE GIVING by sending a donation for our giveback efforts and continuously supporting and valuing P23.”

    P23 Labs encourages more participants to support the initiative and is open for cooperation with parties with shared values.

    Source: P23 Labs LLC

    [ad_2]

    Source link

  • This Pitch Scored a $250,000 Investment — And It Almost Didn’t Happen

    This Pitch Scored a $250,000 Investment — And It Almost Didn’t Happen

    [ad_1]

    Entrepreneur Elevator Pitch is the show where contestants get into an elevator and have just 60 seconds to pitch their business to a video camera. Our board of investors is watching, and if they like what they hear they open the doors and the entrepreneur steps into the boardroom to try to seal the deal. If they don’t like what they hear, the entrepreneur gets sent back down.


    staff

    In this ongoing article series, we’re celebrating the entrepreneurs who walked into the boardroom and came out with a win and sharing their tips for pitching success.

    Who are you and what is your business?

    I’m Alicia Tulsee, founder of Moxie Scrubs, the first direct-to-consumer lifestyle brand for nurses. I went on the show seeking $500,000 and walked out with a $250,000 investment from Kim Perrell.

    How did you prepare for the show?

    I sought the help of our existing investors to come up with a one-minute pitch that would hit all the key points, such as total addressable market (known as TAM), customer acquisition costs (known as CAC), average order value (known as AOV), and key performance metrics such as repeat purchases and product return rates. Also, they wanted to know why and how our product is different from what’s out there in the market today and how it addresses our customer’s pain points.

    We also set up times to go through mock questions and answers to prepare me for any questions we believed investors would like to know after hearing my one-minute pitch for the first time. Once we came up with a pitch that hit all the highlights we agreed on, I practiced it nonstop — while brushing my teeth, reciting it impromptu to my husband when waking up in the middle of the night, cooking dinner. I practiced so much that I could repeat it in my sleep at the drop of a hat! This is exactly what you have to do when your one-minute timer starts counting down.

    Related: Watch the Pitch That Landed a $175,000 Investment

    What did you think was going to happen? What was different from your expectations?

    I honestly had no idea what would happen or what to expect. Nothing could prepare you for how intense the moment is when it’s your turn to give your one-minute pitch: The entire set is pin-drop silent. All eyes, ears and lights are on you. And you get no retakes. All you have is this one 60-second moment to pitch. While it was one of the most intense experiences of my life, I’m happy to share that the whole experience was better than I could have imagined. The entire crew was friendly, helpful and just really great people/ I appreciated their kindness and helpfulness so much because I had a tough time getting to Fort Lauderdale (where the set is) from Boston. I was rerouted to Miami, which is an hour away from Fort Lauderdale by car, my flight was extremely delayed, and I ultimately didn’t get to my hotel until 1 a.m. the day of filming. I was so exhausted from what was already a very intense week. I woke up a few short hours later at 5 a.m., did my hair and make-up and was the first person at the studio, camera ready at 6:30 am. When they said to be prepared for a 10-hour shoot day, they meant it. Even though I did not know what was going to happen throughout the day, all of my preparation, the support from the staff leading up to my turn to pitch, one large cup of coffee, two shots of espresso and a can of Red Bull paid off — I had victory!

    Related: She Flew Around the World to Make This 60-Second Pitch

    Why do you think they opened the doors?

    It’s hard to encompass all your hopes and dreams as an entrepreneur and all of the unique wonderful nuances of your business into a one-minute pitch. I know that investors want to know the key metrics that demonstrate why they should care about your business and why you’re motivated to do what you’re doing. I included the big takeaways from these areas in my pitch and believe that this is what made them want to learn more. For example, I demonstrated our path to profitability, metrics that proved customers love our product and backed it up with what makes Moxie Scrubs the best in the market.

    How did the negotiations go? Would you do anything differently?

    When I received an offer from Kim Perell, I was thrilled. Kim is the investor I went into the show wanting on my team. She knows exactly what it takes as a female entrepreneur to grow and scale your business. Kim built her business from scratch and understands what it’s like for the everyday American with a dream. There was nothing to negotiate because I know the value that someone like her will bring to any company. If you couldn’t already tell, I greatly admire her.

    What do you plan to do with your investment?

    This investment will be used to fund inventory costs and marketing, both essential to scale Moxie Scrubs and take our business’s impact to the next level. We are excited to grow our business with Kim Perell’s mentorship and support and make a huge difference in the lives of every single nurse across the country.

    Related: You’ve Got a Great Invention. Now How Do You Get People to Buy It?

    What did it mean to you personally to get in the doors and walk out with a win?

    As an entrepreneur, every statistic is working against you. As a female minority entrepreneur, the statistics become even worse. Getting through the doors and walking out with a win was proof to me and the world that I have moxie and will continue to defy every statistic that says people like me should not succeed. It was so gratifying because when one woman succeeds, all of us succeed. I found myself saying that Dr. Seuss quote, “Oh the places you’ll go!” in my head all day. This is, in my opinion, the most beautiful thing about entrepreneurship: Entrepreneurship allows you to take your life in directions you would never think could be possible. And it’s even more beautiful when your business helps to improve the lives of millions of people across the country. I feel so grateful that I get to build this amazing brand that supports nurses where they need the support the most. Walking out with a win made me more determined to continue doing what I am most passionate about — supporting nurses.

    What is your advice for anyone thinking of applying to be on a future episode?

    Go ahead and do it. You miss 100% of the shots you don’t take! And my next piece of advice would be: Don’t wing your pitch. Practice. Practice. Practice. You never know what might happen and when things don’t go as planned, your preparation will be all that you have to fall back on. And lastly, please arrive a couple of days early!

    [ad_2]

    Entrepreneur Staff

    Source link

  • Recently Sold Your Business? Consider Creating an Investment Fund Instead of Another Startup

    Recently Sold Your Business? Consider Creating an Investment Fund Instead of Another Startup

    [ad_1]

    Opinions expressed by Entrepreneur contributors are their own.

    Once an entrepreneur, always an entrepreneur, right? It’s in the DNA of a founder to re-create their original success over and over by starting new businesses. After all, it’s why the term “serial entrepreneur” is so popular. Richard Branson, Elon Musk and many more continually reinvest their profits in new ventures. While that is certainly one tactic, using a portion of your profits to create an investment fund can be infinitely more valuable.


    tdub303 | Getty Images

    There are many forms of investment companies that manage pooled assets of multiple private investors, such as venture capital, private equity and hedge funds. While most startup founders don’t think of themselves as finance experts or professional investors, their experience building and exiting successful companies may very well equip them to succeed in making investments on behalf of others.

    The seeds of my journey to creating a hedge fund started when I was an engineer focused on research and education computing (far from a finance background!). Eventually, that led to my role as a CTO at a startup, and I co-founded a firm that grew to $30 million in revenue in just under two years. Several liquidity events from that business became the foundation for building my family office, a private wealth management firm that runs like a hedge fund.

    Today, that is the foundation from which I build my wealth rather than embarking on new business ventures. But why should other entrepreneurs consider following this path? Here are three reasons:

    Related: This Entrepreneur Who Sold Her Company for $1 Billion Wants You to Throw Out the Unwritten Rules That Hold You Back

    Previous success doesn’t mean future success

    If you’ve started one successful company, it’s easy to think that you can do that repeatedly. But doing so can be more challenging than expected. The conditions that created outsized achievements the first time are hard to replicate as the world around us constantly changes. The best use of your proven business acumen may be to invest on behalf of others rather than diving headlong into developing another company.

    That said, starting an investment fund isn’t unlike establishing another company. Your first step — even before you line up initial investors — should be to hire a good lawyer and contact your state’s Secretary of State for guidance about investment fund business structures. In the case of hedge funds, most are formed as limited partnerships, in which the founder acts as the general partner and an incorporated group of investors act as the limited partners. This means you would likely need to set up two entities: one for the fund itself and one to incorporate its various investors.

    Bigger potential upside

    A fund structure is attractive because it allows a successful entrepreneur to use their expertise to help others navigate investments. In addition, the financial rewards can be substantial. Successful fund managers, whether in venture capital, private equity, hedge funds or real estate, are highly compensated and only limited by their performance and how many investors they can attract.

    For successful entrepreneurs such as myself, launching or participating in funds can amplify their expertise with capital and create a new kind of business that also brings about material financial contributions. In the course of founding your startup, you likely got to know some wealthy individuals who contributed to your success. Founding a fund can enable you to deliver value to these individuals in a new way. Because time is our most scarce resource, it doesn’t make sense for individuals with $20MM to invest their time into a $1-2MM opportunity, when instead they could invest that capital into your fund, go to the beach and call it a day.

    Related: She Was Homeless. Now She Runs a $25 Million Investment Fund for Women of Color.

    Leave the startup grind behind

    Once entrepreneurs have participated in major liquidity events, they realize a great deal can be gained by exploring new investment opportunities, managing taxation, and utilizing estate planning. After all, the point of founding a startup for many entrepreneurs is to compress the working years of one’s life, sell the company and have more years of freedom. Founding an investment fund can allow you to do that.

    For me, the idea of a fund seemed an appropriate encore to a successful business career. Fast forward to today — the strategies I spun off from my family office have become the heart of the TrueCode Capital Crypto Momentum Fund I founded. It allows me to spend my time sharing the lessons that made me a successful investor in digital assets and helping individual investors and family offices achieve growth, all while sleeping through the night.

    Of course, founding an investment fund — like any venture — isn’t for everyone. But for those with confidence in their ability to read the market, with contacts among high net-worth individuals, and with a proven track record of business success, starting your own hedge fund may be the next career step you’ve been looking for.

    [ad_2]

    Joshua Peck

    Source link

  • How To Find Success During Search Fund Launches

    How To Find Success During Search Fund Launches

    [ad_1]

    Opinions expressed by Entrepreneur contributors are their own.

    Search funds have started flipping the script on generalists winning in a largely specialized business environment. The efforts of a specialized thesis have recently proved more fruitful than the opportunistic approach, as Stanford’s 2020 Search Fund Study found, “Searchers who focus their search, as well as developing and adhering to a systematic approach of creating deal flow and analyzing deal opportunities, have a higher likelihood of identifying and closing an acquisition.”

    Although the inspiration for a thesis and industry vertical might be apparent based on the searcher’s passions and past experience, often finding an enterprise that fits the search mold could prove challenging.

    Related: Search Funds: What You Need To Know About This Investment Model

    The good news, however, is that value chains in almost every industry are riddled with opportunities that fit the model. They are the hidden gems. What this means, for example, is if the goal is to serve as an operator in the healthcare supplement industry (from knowledge gained over the years as a professional athlete), an operation that makes or procures a certain ingredient that goes into the final product, as opposed to the final product sold to consumers, would make for an ideal opportunity.

    This “value-chain-based searching” approach also opens up flexibility on the geographic front. Running a geographically agnostic search while widening the pool of potential targets might not be viable for most searchers. Offsetting this with more businesses within an industry’s value chain helps keep the net wide while respecting the searcher’s mandate.

    While necessary from the outset, alignment with the entire cap table on a thesis (and geography) and continuing commentary through the process unlocks resources that come from having a large experienced team and seeing multiple searchers and transactions from an investor’s lens — the successful, the break-evens and those who didn’t make it. The most valuable resource of which is a playbook, be it in the form of time committed to mentorship or proprietary documentation conducive to a successful search.

    Related: Search Funds: A Financing Option for Business Buyers

    Whoever first said, “it takes a village,” was probably a searcher. Building out a team who are unequivocally sold on the vision and believes in the mission is crucial to the searcher’s experience as a leader pre-CEO, as well as their chances of landing on a hidden gem of a business. Most searchers achieve this through interns, both in undergrad and business school, looking for an appetizer to private equity.

    While more heads the better by way of sourcing and in the data room looking over opportunities, a key factor lies in the fund’s governance. Karl Scheer, now CIO at the University of Cincinnati, was clear in his governance remarks, “you can’t have investment success with a bad governance structure.”

    Although at a vastly different scale, the same principles apply in aligning incentives and what a potential intern or search fund fellow can get for their time and effort. Additionally, a decision to build out a remote vs. in-person team in 2022 remains a personal preference. This could change with a clearer answer as work dynamics continue to get tested and studied over the next few years.

    Another important set of people to have in a searcher’s arsenal is a set of mentors who celebrate your success by way of unbiased advice — advisors, for lack of a better term. With a large population of the search community embarking on the search journey out of business school, a valuable pool of resources could come from a supportive group of professors and classmates in touch with the focus industry. The Stanford Search model dubs these people as “river guides” and even suggests an incentive structure with which searchers have found success over the years.

    With the people in place, the tools to set the search up for success help close the loop on the most effective use of everyone’s time. A tech stack helps automate low-effort tasks like initial outreach, and net-net gets the searcher in front of more potential targets. A project management suite opens up a layer of transparency on what everyone’s working on and helps move the needle from zero to one.

    Finally, like many things, we are tuned to think the next opportunity around the corner could be a better bet, and regardless of how good the current deal looks, it’s hard to think past the “what-ifs.” With most searches limited to a two-year time horizon to complete an acquisition and competition from other searchers as well as some private equity funds intensifying, having a “take the train” approach should be top of mind. If a deal fits the thesis, can model out successful growth over the next five to seven years, has a viable exit strategy, and is an experience a searcher deems enjoyable above all else — go for it!

    Related: A New Breed of Private Equity Investors Present More Exit Options Than Ever for Entrepreneurs

    [ad_2]

    Karl Eshwer

    Source link

  • How to Make Money on Airbnb

    How to Make Money on Airbnb

    [ad_1]

    Opinions expressed by Entrepreneur contributors are their own.

    Investing in real estate is good for people who want to make money work for them. And this is because, with real estate investments, you can buy a property and use it to earn more. Now there are many ways to use an acquired property for profit. But perhaps the ones that are gaining more traction are short-term rentals on Airbnb.

    But what is Airbnb?

    If you’re an avid vacationer, you’ve probably heard of the app that can connect you with people who will let you stay on their property for a period of time. This app, called “Air Bed and Breakfast” or Airbnb, was launched by two industrial designers who moved to San Francisco in 2008.

    They couldn’t afford to pay rent for their apartment during this time, so they decided to earn extra by letting people who couldn’t find hotels rent their space temporarily. And long story short, their strategy became a massive hit because it expanded into a vast network of 4 million hosts worldwide. And up until today, their platform continues to create more opportunities for hosts and real estate investors in general.

    Related: Airbnb CEO: It Took Us 12 Years to Build, and We Lost Almost Everything in 6 Weeks

    Long-term vs. short-term rentals

    Real estate investments include property rentals, and there are two main ways to earn from them: Long-Term Rentals and Short-Term Rentals. When I started as a real estate investor in 2012, all my properties were long-term rentals. But in 2017, I transitioned all of them to short-term ones, most of them through Airbnb.

    Why? There were a lot of factors that made me decide to go all-in with Airbnb:

    1. You make less money on long-term rentals.

    Did you know that when done correctly, you can make a $2,000 average monthly profit on Airbnb? Of course, many things must be considered to get to this number. Plus, you can make less or more than this amount every month.

    But the point is, with Airbnb short-term rentals, you can determine your price, and no other person has a say. You can’t do this with traditional long-term rentals. With long-term rentals, you can only set a fixed amount and increase your rent by 3% to 5% a year.

    2. You are under bigger obligations as the landlord.

    There are several things to consider when hosting a long-term rental, and one of those is that your tenants may never deep clean or take care of repairs on your property. The reason is simple: they won’t be staying there forever. Ultimately, the obligation still falls on your shoulders.

    Another fact worth mentioning is that you won’t be able to evict your tenants easily. Now, the stipulations change from city to city and state to state, but typically after 30 days of staying, your guests acquire certain rights.

    Case in point: In 2020, the government passed an Eviction Moratorium where landlords are not allowed to evict their tenants on the grounds of non-payment. This was, of course, helpful for a lot of tenants all over the country. But now, some landlords are still owed thousands of dollars in back rent, and they may never get the chance to go after them again.

    3. With Airbnb short-term rentals, you don’t have to work like an employee.

    Short-term rentals are passive in nature, which means that if you have a property, you can still earn even if you’re not around. Add this to Airbnb’s online platform, and your market potential gets wider.

    But here’s the thing: you may still be trapped by working around the clock to manage your listing. Thankfully, there is a way to build a system and create a team that operates the business on your behalf. We use this innovative business model with Airbnb, which has since accelerated our cash flow and offered tremendous growth.

    4. You don’t have to buy properties to get started.

    If you’re familiar with cash flow goals for long-term rentals, you’ve probably heard that the aim is to earn $200 per unit per month. This is all well and good, but if you’re trying to replace a job that gives you $5,000/month, this income won’t give you much. You still need to own at least 25 units to get there.

    So what you can do instead is to buy a couple of units, give them a nightly rate, and launch them on the platform to start getting bookings and recover your returns faster.

    But what if you don’t own properties and still want to do Airbnb? Well then, all you need to do is apply the Arbitrage Model.

    The Arbitrage Model, also called subleasing, is where you rent properties from other landlords, get their permission in writing, and then launch their property as your short-term rental on Airbnb. Yes, this strategy is perfectly legal and lets you start a business without buying properties.

    Related: How to Make Money Online: The Basics

    Are there other ways to start an Airbnb, even if you don’t own properties?

    Yes. Aside from subleasing, there are two more ways to launch an Airbnb business without much capital.

    1. Co-hosting

    With the co-hosting strategy, you don’t have to buy or own properties because all you have to do is to manage and help hosts manage their listings. This method allows you to learn more about the business and earn.

    2. Using O.P.M (Other People’s Money)

    A balance transfer is when you transfer the money available on your credit card into your checking account. You can then use this money to sublease a property and start your own Airbnb business without using any of your money.

    Airbnb is a great platform for real estate investors. Its innovative business model will allow you to create positive cash flow, get started even if you don’t own properties yet, and enjoy the time, location, and financial freedom that most people only dream about.

    Related: How to Start a Business with Only $1,000

    [ad_2]

    Jorge Contreras

    Source link

  • Bearish Bets: 3 Stocks You Should Consider Shorting This Week

    Bearish Bets: 3 Stocks You Should Consider Shorting This Week

    [ad_1]

    Each week we identify names that look bearish and may present interesting investing opportunities on the short side.

    Using technical analysis of the charts of those stocks, and, when appropriate, recent actions and grades from TheStreet’s Quant Ratings, we zero in on three names.

    While we will not be weighing in with fundamental analysis, we hope this piece will give investors interested in stocks on the way down a good starting point to do further homework on the names.

    Alcoa Loses Its Mettle

    Alcoa Corp. (AA) recently was downgraded to Hold with a C+ rating by TheStreet’s Quant Ratings. 

    The producer of alumina and aluminum products delivered poor earnings last week, but because the markets were priced to rally the stock got a lift. Nonetheless, the chart is still showing weakness, with lower highs and lower lows. The downtrend line is in place too, as buyers are getting exhausted. That is the time to swoop in on a put play.

    The Relative Strength Index (RSI) is bending lower and the cloud is red. If taking on a short position, target the $33 area, put in a stop at $47 just in case.

    Intercontinental Exchange Goes Cold

    Intercontinental Exchange Inc. (ICE) recently was downgraded to Hold with a C+ rating by TheStreet’s Quant Ratings. 

    This operator of regulated exchanges and clearing houses has taken a turn for the worse. With lower highs and lower lows there is a very negative chart pattern here. While there seems to be some support around the $90 area, that may fall through this time around.

    Money flow is miserable and bearish, and the 50-day moving average remains under pressure. The recent rally in this stock barely made a dent — that is telling. The cloud is red and the RSI is about to roll over. Take a shot with ICE; if short, target the $75 area (aggressive), put in a stop at $100.

    Stag Industrial Sags

    Stag Industrial Inc. (STAG) recently was downgraded to Hold with a C rating by TheStreet’s Quant Ratings. 

    The real estate investment trust that focuses on single-tenant industrial properties has fallen hard since the late spring. With lower highs and lower lows on the chart Stag is in trouble. We do see a close above the 50-day moving average, which could be considered at least a positive, but the weight of evidence supports another drop in price.

    Ideal entry points for a short include a move up to resistance, which is what we see happening here with Stag. The cloud is red and the trend is down. Target the $25 area, put in a stop (tight) around $31.

    Get an email alert each time I write an article for Real Money. Click the “+Follow” next to my byline to this article.

    [ad_2]

    Source link

  • 3 High Dividend Stocks to Buy and Hold

    3 High Dividend Stocks to Buy and Hold

    [ad_1]

    When it comes to finding great stocks to hold for the long-term, investors have many routes that can be taken to accumulate wealth.

    Some stocks are value-oriented, offering shareholders a cheap purchase price relative to the earnings power of the business. Some offer high levels of growth, promising future price appreciation based upon much higher earnings. And of course, some offer high dividend yields, which are attractive not only for income-oriented investors that want to use dividends to live off of, but for those that want to reinvest dividends as well.

    We believe the sweet spot of dividend stocks is to buy ones that have more than one of these traits, and in this article, we’ll take a look at three high-dividend stocks we think investors can hold for the long-term.

    Hear Me Now on This One

    Our first stock is Verizon Communications (VZ) , which offers communications, technology, and entertainment products and services to consumers and businesses globally. The company is perhaps most known for its wireless phone service, and the hardware sales related to that business. Verizon has an enormous, nationwide 5G network built out to support that business, giving it a competitive advantage in that space. The company has about 115 million wireless retail connections, in addition to seven million broadband connections, and about four million Fios connections.

    Verizon was formed in 1983, generates about $137 billion in annual revenue, and trades today with a market cap of $153 billion.

    Despite being what amounts to a utility, Verizon actually has a decent history of earnings growth. In fact, the company’s five-year earnings-per-share growth rate has averaged nearly 7%. We think Verizon’s growth going forward will be more like 4% annually, and that it will be driven by revenue growth, primarily. Verizon is buying back stock in small quantities, so it is likely to see a modest tailwind from that effort as well.

    The stock is extremely cheaply valued today as well, as it trades for just 7 times this year’s earnings estimates. That compares very favorably to our estimate of fair value at 11 times earnings, and given this, we expect a 9%+ tailwind to total returns from the valuation alone in the years to come.

    Verizon is cheaply valued, and has a decent growth outlook, but its dividend is likely to catch the attention of investors as well. The stock has seen rising dividends for the past 18 years, a period which has encompassed multiple recessionary periods. The rate of dividend growth in the past decade has averaged under 3%, so it’s not a hugely impressive dividend growth stock. However, the shares yield a massive 7.2% today, which is the highest yield Verizon has ever had. That puts it in rarified company from a yield perspective.

    Finally, we expect the payout ratio to be just 50% of earnings for this year, meaning the dividend is very safe, particularly given Verizon’s predictable earnings. That also means there’s ample room to continue raising the payout for years to come.

    A History of Growth

    Our second stock is Enbridge (ENB) , an energy infrastructure company that is based in Canada. Enbridge is a diversified energy company that operates five segments: Liquids Pipelines, Gas Transmission and Midstream, Gas Distribution and Storage, Renewable Power Generation, and Energy Services. Through these segments the company offers a wide variety of services, including pipelines and terminals for crude oil and other hydrocarbon liquids such as natural gas, storage facilities, and renewable power generation.

    The company was founded in 1949, generates about $39 billion in annual revenue, and trades with a market cap of $77 billion.

    Enbridge, like Verizon, has a fairly strong history of growth. Enbridge has grown its cash flow per share by more than 6% annually in the past five years. We see 4% going forward, driven by big investments the company has made in new projects in recent years.

    We see fair value for the stock at 11 times earnings, but the shares trade today at just 9.4 times earnings. Therefore, in addition to the 4% growth rate, we expect a 3%+ tailwind to shareholder returns from a rising valuation over time.

    Enbridge has raised its payout for an impressive 27 consecutive years, which is a rarity in the highly cyclical energy sector. In addition, over the past decade the company’s dividend has averaged 11% annual growth, so Enbridge is very strong on the dividend growth front. This has helped drive the yield to 6.9% today, which is elevated for Enbridge on a historical basis.

    The payout ratio for this year should be about two-thirds of cash flow, so like Verizon, we see Enbridge’s nearly-7% yield as quite safe, and with further room to grow.

    Fit for a ‘King’

    Our final stock is Altria Group (MO) , which manufactures and sells smokeable and oral tobacco products in the U.S. The company makes and distributes cigarettes under the ubiquitous Marlboro brand, cigars and pipe tobacco under the Black & Mild brand, and moist smokeless tobacco under the brands of Copenhagen, Skoal, Red Seal, and Husky. Altria also has strategic investments in Cronos, a cannabis brand, and Juul, a vaping brand.

    Altria was founded in 1822, produces about $21 billion in annual revenue, and trades today with a market cap of $82 billion.

    Altria’s EPS have grown at about 7.5% annually in the past five years, despite the fact that the market for smokers in the U.S. continues to decline. The company has been able to push through many pricing increases to help offset waning demand, and that has helped boost profitability. We see more modest 1.4% annual growth going forward as we think revenue increases will be more difficult to come by in the coming years.

    Fair value for Altria is 11 times earnings, and today, the shares go for 9.5 times this year’s estimate. That leaves the potential for a ~3% tailwind to shareholder returns in the years to come from a rising earnings multiple.

    Altria’s dividend history is nothing short of exemplary, with the company having raised its payout for 52 consecutive years. That makes Altria a member of the elite Dividend Kings, a group of stocks that have raised their dividends for at least half a century consecutively. In addition to that, Altria has boosted its dividend over the past decade by nearly 8% annually. That has helped drive the yield to its current value of 8.1%, which is more than 5x that of the S&P 500.

    The stock’s payout ratio is 74% for this year, so it still has room for many years of growth given the company’s highly predictable earnings.

    Final Thoughts

    While not all high-dividend stocks are worth owning, there are some that are offering shareholders truly outstanding value today. We like Verizon, Enbridge, and Altria for their combination of dividend longevity, safe payout ratios, low valuations, and very high dividend yields. Given these factors, we rate all three a buy today for long-term investors.

    Get an email alert each time I write an article for Real Money. Click the “+Follow” next to my byline to this article.

    [ad_2]

    Source link

  • Market Does a Head Fake and the Fed Can’t Be Happy About It

    Market Does a Head Fake and the Fed Can’t Be Happy About It

    [ad_1]

    After poor earnings reports from Amazon (AMZN) , Microsoft (MSFT) , Meta (META) , and Alphabet (GOOGL) , the logical move was for the market to the sell off. Even the mighty Apple (AAPL) talked about slowing growth and is trading at a price-to-earnings ratio of 24 while anticipating single-digit EPS growth.

    However, in the stock market, the most logical move often sets up conditions for the exact opposite action. That is what happened on Friday as the indexes exploded higher on the negative news. The best explanation for the strength wasn’t the great fundamental news. The strength was largely a function of cash flows, poor positioning, short-squeezes, seasonality, the potential midterm election outcome, and hope that the Fed is about to become just a little less hawkish.

    The action in Apple is particularly interesting.

    Apple did not post a surprisingly strong earnings report. It was not a huge surprise, yet the stock jumped over 7%, which is its single biggest gain since announcing a four-for-one split back on July 31, 2020. Money poured into Apple because it is viewed as a “safe haven” stock that is going to hold up despite the valuation, the economy, or anything else. It is attractive for reasons that have nothing to do with the health of the market.

    This sort of “flow” drove the action, but there was also quite a bit of hope about the likelihood of a slightly more friendly Fed. Despite that hope, bonds traded lower on Friday and saw increased inversions between different durations that suggest that a recession is coming.

    This is not the first time this year that the market has had high hopes of a dovish pivot by the Fed. Every bounce this year has ended with either hawkish comments from Jerome Powell or economic data that suggest inflation remains elevated. The Fed is releasing its next interest-rated decision on Wednesday, and a big runup into the news is going to create a very dangerous technical setup for the bulls.

    It is important to keep in mind that the Fed does not want a big market rally at this juncture. A market rally is inflationary, and it undermines the Fed’s efforts. Even if the Fed does cut its hawkishness a bit, it is likely to be accompanied by some severe rhetoric to remind the market that more hikes are coming and the battle against inflation is not yet over.

    We have had a number of huge rallies similar to this so far this year, and they make market players feel very good, but these types of moves almost always lead to elevated volatility in the days ahead. With the Fed and the election coming up, we will have some handy catalysts for more big swings.

    Have a great weekend. I’ll see you Monday.

    Get an email alert each time I write an article for Real Money. Click the “+Follow” next to my byline to this article.

    [ad_2]

    Source link

  • Everything You Know About Your 401(k) is Wrong. Here’s Why.

    Everything You Know About Your 401(k) is Wrong. Here’s Why.

    [ad_1]

    Opinions expressed by Entrepreneur contributors are their own.

    Retirement savings is crucial for everyone because relying on social security is not enough to sustain yourself through your twilight years, especially considering that without any changes, the current social security system will only be able to pay benefits at 80% in 2035 and beyond. And the sooner you start, the better off you are.

    It’s true that tax-deferred accounts like traditional IRAs, 401(k)s, defined contribution plans and cash balance plans allow you to save a portion of each paycheck, tax-deferred, to live on once you hit retirement age. Still, everything you’ve learned about these types of accounts is wrong. And here’s the scary part — it’s not that the people spreading incorrect information are uninformed. Many of them absolutely do know that what they’re telling investors is wrong, but they continue because they have a financial incentive to do so.

    So in this article, I’m going to break down why what you know about your tax-deferred accounts is wrong and what you can do to ensure your retirement is spent living the life you love rather than struggling to make ends meet.

    Related: A 401(k) is Risky. Here’s a Safer Investment Strategy.

    Tax deferral plans only sound good in theory

    While most tax-deferred accounts may seem like a great thing, they actually come with a lot of severe disadvantages that adversely affect your investment and retirement goals.

    You’ll face higher taxes in the future

    You may get a perceived tax break right now by putting money into your tax-deferred accounts, but all you’re really doing is deferring your taxes. It’s true that this does allow you to accumulate a larger balance due to compounding, but that also means you’ll pay higher taxes when you eventually do begin withdrawing your money.

    As time goes on, there’s always the risk of higher tax rates when you take distributions. This alone should make you reconsider because you could easily end up paying more tax than you would now. In many cases, your tax-deferred compounding may not make up for the higher taxation, especially in the new economy of stagflation and higher interest rates.

    Most people today go through their daily lives with a false sense of security in their financial decisions. That’s both because we’ve all been misinformed by many in the financial industry and because most people have delegated their financial decisions to someone who has a vested interest in them investing in certain financial asset classes.

    It’s only much later in life, near or after retirement, when most people realize that they’ve made the wrong financial decisions, and by then, it’s usually too late.

    Related: Searching for Talent? Consider Setting Up a 401(k) for Your Small Business to Keep Up in the Market.

    Your money is locked until you’re 59.5 years old

    Any money you place into a tax-deferred account is locked until you reach age 59.5. This means that unless you want to pay a hefty penalty to access it earlier, you’re stuck letting Wall Street handle your funds. There’s no ability to access or use the money for a better investment opportunity that may come along.

    With few and limited exceptions, if you leave the workforce before age 59.5, you can’t live off of your investments if they’re all in a tax-deferred account. A Roth IRA will let you withdraw your contributions but not your earnings, providing some flexibility with those funds.

    You learn little to nothing about investing

    When you put your money into these tax-deferred accounts, you’re trusting your financial future to the financial advisors and money managers who have a vested interest in you following the status quo. Essentially, they make their money by getting you to invest in certain financial instruments and have no direct responsibility or liability for actual performance.

    This teaches you nothing about how to make the most of your wealth, how to use your assets to generate cash flow or how to ensure you’re making solid investments. This is, in my opinion, the biggest disadvantage that no one talks about: Abdication of your own financial future.

    If you discover a fund, stock or another investment that you want to buy, but your retirement plan doesn’t offer it — you’re simply out of luck. The limited choices are meant to keep administrative expenses low, but those limitations prevent you from having full control over the growth of your assets.

    Related: 4 Ways to Save for Retirement Without a 401(k)

    Loss of other tax benefits

    Other tax benefits, such as cost segregation, depreciation and long-term capital gain lower tax rates, are void inside these tax-deferred accounts. You also lose the stepped-up basis tax mitigation allowance for assets you wish to pass to heirs, which greatly reduces the ability to create generational wealth.

    Ridiculous fees and costs

    The small company match in your 401(k) isn’t much more than a little bit of extra compensation. If you’re only using a 401(k) for retirement, you’re doing yourself a disservice. They’re full of fees, from plan administration fees to investment fees to service fees and more. And the smaller the company you work for, the higher these fees tend to be.

    Even if your fee is just 0.5%, which is the absolute bottom of the fee range, you’re still paying far more for your 401(k) than you should, and that money could be invested in other places to help fuel your retirement growth. For example, if you’re maxing out your contributions at $19,500 per year, with an additional $3,000 in employer contributions, you’ll pay about $261,000 in fees, which translates to 9.5% of your returns.

    Opting out of a 401(k) retirement plan enables you to take that 9.5% and invest it in other more effective ways that will provide a higher return. But what should you do instead?

    Self-direction and Roth IRA conversion

    Qualified retirement accounts not tied to an employer-based plan may be “self-directed.” This means that you, the account owner, can choose from an unlimited number of investment assets, including alternatives such as real estate. Moving such accounts from your existing custodian to one that allows for full self-direction is easy to do and should be high on consideration for those who want more control over their investments.

    Roth conversions can be a great way to save money on future taxation. You can convert your traditional IRA into a Roth IRA, which means you will pay taxes on the money you convert in the year of conversion, but after conversion, your money will grow tax-free. This is a great way to save money on taxes in the long run since you won’t have to pay taxes on the money you withdraw from your Roth IRA in retirement.

    Don’t forget the J-Curve strategy

    The idea behind the J-Curve is that if a non-cash asset is converted from a traditional IRA to a Roth IRA and it experiences a temporary loss in market value, the tax on the asset conversion can be proportionally lowered based on the reduced asset value at the time of conversion.

    This strategy is available to anyone who’s invested in stocks, bonds, mutual funds and index funds and experienced a market loss. In the alternative space, however, the decreased valuation is based on information known in advance, with a plan based on a future value add to the asset. This means that while you don’t take a realized loss over the long term, you can benefit from a paper loss to reduce your tax exposure in the short term.

    The J-Curve strategy is underutilized, mainly because so few people know about it, but it can save you hundreds of thousands of dollars when properly applied.

    Ignore what you’ve been taught about retirement savings

    If you want to dramatically change the trajectory of your retirement and create generational wealth for your family, I have a simple piece of advice — ignore everything the financial industry has taught you about tax-deferred accounts.

    Take the time to learn about investing, and avoid the traditional tax-deferred accounts like traditional IRAs, 401(k)s, defined contribution plans, and cash balance plans — instead, leverage assets like Roth IRAs and real estate, which are superior in literally every way.

    [ad_2]

    Dr. David Phelps

    Source link

  • Why Gold Isn’t the Ideal Hedge Against Inflation in 2022

    Why Gold Isn’t the Ideal Hedge Against Inflation in 2022

    [ad_1]

    Opinions expressed by Entrepreneur contributors are their own.

    Gold has long been regarded as one of the most effective investments for protecting one’s wealth from various possible adverse financial effects. A plummeting stock market and an increase in inflation are two examples of these hazards. Currently, inflation is at extremely high levels, yet gold prices have not been doing particularly well. In terms of the U.S. dollar, it has decreased by over 10% so far this year, which contradicts the overarching perception of gold as an inflation hedge.

    Uncovering the appeal of gold as a traditional inflation hedge

    To reduce their risk exposure, traders and investors in the financial markets often use a strategy known as hedging. In most cases, this is accomplished by creating an opposite position in the market to compensate for any loss that may have been made in their primary position. Hedging may be thought of in a straightforward manner by comparing it to purchasing an insurance policy. When we speak about hedging against inflation, we are referring to the process of preserving your capital from the depreciating effects of inflation. Therefore, to hedge against inflation, investors want assets that are unaffected by growing inflation.

    Gold has always been seen as a hedge against inflation throughout time. As a result, it is the asset of choice for investors who want to ensure that their money will continue to have the same buying power in the future while minimizing the amount of risk they are exposed to. When there is an uptick in inflation that is being kept under control, central banks will not necessarily vote to raise their key interest rates automatically. This indicates that the real interest rates, calculated by subtracting the nominal interest rate from the inflation rate, will be negative for assets such as government bonds.

    When interest rates are at historically low levels, gold’s ability to shift in the opposite way of real interest rates makes it an efficient hedge against inflation. Because of this, investors can protect the value of their funds from experiencing a significant decline.

    Related: Gold Stocks That Might Be Worth A Look As Inflation Continues To Run Hot

    Gold’s decline over 2022

    In March 2022, as a direct consequence of the conflict between Ukraine and Russia, the price of gold reached an all-time high of more than $2,000 per ounce. Although inflation has reached record highs, gold prices have been falling for the last few months.

    As interest rates continue to climb, some investors are considering selling gold, which does not pay interest, to purchase assets that do pay interest. Temptations come in the form of greater returns, which are now accessible in bonds, property or even shares of stock. Other temptations come in the form of higher interest rates on cash.

    Gold’s position in comparison to other asset classes — such as stocks, currencies and bonds — has recently seen significant shifts due to these developments. All asset classes function independently of one another for various reasons, including changes in how the economy operates, modifications to monetary and fiscal policy and many other factors. Because each of these asset classes experiences a different price action dependent on a variety of factors, including supply and demand, the prevailing interest rate regime, inflation, gross domestic product and other factors, investors should view each of these asset classes as having equal importance.

    Nowadays, the reputation of gold as a trustworthy hedge against inflation is in jeopardy as investors go to other parts of the market in which they might seek refuge from increasing costs.

    Related: Here’s How Inflation Might Impact Your Portfolio

    Why isn’t gold performing better?

    Some analysts consider that gold is a good method to protect oneself against inflation before it occurs. However, the situation changes drastically whenever there is significant price inflation — assuming that the Fed successfully brings inflation under control. Once inflation has reached a high level, it is essentially too late to “hedge” against the inflation that has already occurred, and the gold prices often suffer when the dollar is stronger as well. The price of bullion is expressed in terms of the U.S. dollar, and a strong dollar has the effect of dampening excitement.

    “Gold seems to protect purchasing power over a long period — say, 100-plus years — but provides very little protection against inflation in the short term,” according to Kevin Lum, a CFP and founder of Foundry Financial.

    [ad_2]

    Ron Bauer

    Source link

  • Can Verizon Reconnect With Investors After Hitting a 52-Week Low?

    Can Verizon Reconnect With Investors After Hitting a 52-Week Low?

    [ad_1]


    Stocks quotes in this article:

    VZ

    When we  reviewed shares of Verizon Communications ( VZ) back on August 31 when we wrote, “Avoid the long side of VZ as the short and long-term charts are bearish.” 

     

    On Friday shares of VZ sank to a new 52-week low on the heels of missing analyst estimates of Q3 subscribers. 

     

    Let’s check the charts and indicators. 

     

    In this daily bar chart of VZ, below, we can see a downside price gap on Friday. A new 52-week low was reached. Prices are well below the declining 50-day moving average line and below the weak 200-day line.

     

    The On-Balance-Volume (OBV) has made new lows for the move down as well and confirms the observation that sellers of VZ have been more aggressive than buyers. The Moving Average Convergence Divergence (MACD) oscillator is bearish.  

     

     

    In this weekly Japanese candlestick chart of VZ, below, we have a negative picture. Prices have made a “parabolic” decline the past few months. VZ is below the bearish 40-week moving average line. The weekly trading volume has not given us a clue that weak hands have sold and strong hands have bought.

     

    The weekly OBV line is bearish and the MACD oscillator is bearish. 

     

     

     

    In this daily Point and Figure chart of VZ, below, we can see that prices have reached and exceeded a downside price target in the $36 area. 

     

     

     

    In this weekly Point and Figure chart of VZ, below, we used a five box reversal filter. Here the software suggests a price target in the $31 area. 

     

     

     

    Bottom line strategy: In full disclosure I have been a VZ customer for over 25 years but that loyalty does not make the charts more attractive. VZ could fall further in the weeks ahead. 

    Get an email alert each time I write an article for Real Money. Click the “+Follow” next to my byline to this article.

    Employees of TheStreet are prohibited from trading individual securities.





    Real Money’s message boards are strictly for the open exchange of investment ideas among registered users. Any discussions or subjects off that topic or that do not promote this goal will be removed at the discretion of the site’s moderators. Abusive, insensitive or threatening comments will not be tolerated and will be deleted. Thank you for your cooperation.
    If you have questions, please contact us here.

    Email sent

    Thank you, your email to has been sent successfully.

    Oops!

    We’re sorry. There was a problem trying to send your email to .
    Please contact customer support to let us know.

    Please Join or Log In to Email Our Authors.

    Email Real Money’s Wall Street Pros for further analysis and insight

    [ad_2]

    Source link