The order of investing


A brief list of investment ideas

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A brief list of investment ideas. 

Base dividend income from stocks

Preference shares with large fixed dividend

Penny stocks, Contracts for Difference, foreign exchange, derivatives

Commodities, metals etc

Bonds – banks are not lending yet companies are crying out for funding

Property investments various – always an interest of John’s

Peer2peer lending – 6-7% ROI for small amounts, short time

Businesses – building some and investing in others

Managed Forex Accounts (Discover Forex Managed Accounts – The Only Guide You Need)

Now maybe I am a bit mad – if I had £1 (even $1) for every time I have read about the End of Britain or other rubbish, then I would already have amassed enough for a comfortable retirement.  But unfortunately the authors of such dribble are not so generous.

And it is dribble because as long as there is money around, there is money to be made.  This stuff is all marketing junk anyway and the less said about it the better – in fact the problems of the British economy are nothing like those of the Eurozone, Greece, Argentina, Iceland despite sensationalist newspapers and silly marketing ploys.  They are a product of  long-term bad overall management and recent banking collapse.  Any recovery is very much despite, rather than because, of government.

Investment is a process that should be devoid of such emotional baggage and the product of clear and analytical approaches.  Anything else and you are following the herd – probably off a cliff.  You only need to do this once to end up badly bruised or broke.  The only emotional aspect which we allow is that investment should not harm or exploit people – but this is actually rational because people respond well when treated well and co-operation is always better than confrontation.

So I now need to take a closer look at these ideas in detail and being entirely logical we will not start with number 1 but number 6 – Property investments.

The received wisdom in the UK is that property investment is a failsafe way of making money.  I have two comments.  Firstly with the wisdom of hindsight, this was true although we rarely see the results of people who failed in this endeavour and anyway we are in much more uncertain times these days.  And secondly, the time frame for us is wrong.

Even so, let’s look at what can be done.

There are essentially three approaches to property investment:

  • Buy houses or apartments to let
  • Buy houses or apartments to do up and sell
  • Put cash into some managed scheme or other

There is some potential in buying property to let these days. 

Should this be residential or commercial?  Without a doubt, leave commercial property alone – it is a much more fragile market.  If a business goes bust, firstly it may decide to withold rent to try to trade out of its position and then you are likely to get contagion.  High streets up and down the country – and office blocks – are becoming empty.  Only in the more affluent areas can you see all shops occupied.  If a business goes bust, it just closes up shop and dies.  If people go bust they still have to live somewhere.  For this reason, residential property is the only serious consideration until the economy recovers – which seems unlikely within our time frame.

The prices are – or have dropped – yet many people can’t buy themselves.  As they have to live somewhere, there is indeed a good market in letting property. But there are substantial hoops to jump through if you are going to let property legally and honestly.  If you already have a portfolio and staff to handle this, fine but starting from scratch it is a very big hill to climb.  For example in the UK you have to certify that the gas and electricity supplies are checked every year.  You also have to place any deposit in a stakeholder account – no more running off with deposits. This is all very good – no-one in their right mind wants to be a bad landlord.

While rents may be going up at the moment, the penny is finally dropping that as we are not building enough starter homes, this will be corrected which will force the rents down over time.  There is also the insidious support of Housing Benefit which is state aid for rent and can be withdrawn at any moment in principle.  So tenants would be left – are already left in fact – with having to find rent from reducing incomes and as a landlord, you are piggy in the middle.  Rents will therefore fall.   If you have recently paid a market price for your property, you could be left with no ROI at all.

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