|
 
October 2008
Index of all
past
Affiliate Corner columns
Investing in alternatives
By Bert Hermelink,
Strategic Advantage Financial
As I write this, we’ve had a week of daily 300-500+ point swings on the Dow. For the first time since 1993, a money market fund has lost value. Corporate and municipal bonds have lost value and seen their payouts reduced. The historical “bastions of safety” have been shaken, and the government is intervening to avoid unimaginable failures. Where is a person to hide? Where should one invest to have some expectation of safety and returns?
The residential real estate market offers opportunities, but not without risk. Larger down payments, renovation costs, debt service, and getting and keeping good tenants are risks not to be taken lightly. What if the market stays soft for years? Do you have the reserves to hang on?
Market-traded securities are at risk for “emotion-based” volatility. Huge swings will cause most of us huge stress. We love “up volatility”; we despise the downs.
The system seems broken, and corporate governance issues abound. Perhaps it is time to look elsewhere.
Investments not traded on exchanges are generically referred to as “alternative investments” and can be great places to put a portion of your investment dollars. For example, some non-traded REITs (Real Estate Investment Trusts) can be purchased for as little as $1,000 and are designed to offer current cash flow with the expectation of additional capital gains when the program ends. Because they are not traded, they escape the volatility.
With a wide variety of investment goals and types, these REITs span the spectrum (multi-tenant industrial parks, Class A office buildings, apartment complexes, etc.) of commercial real estate. Equipment leasing programs can be invested in for as little as $2 to $5,000. These companies purchase necessary equipment and lease it to end users. Again, there are a variety of types of equipment, leasing periods, etc.
Accredited investors (generally having over $1 million net worth, or $200,000 annual income), have a wider array of options, including oil and gas programs, private equity offerings, etc., but for both accredited and non-accredited investors, the options available for non-traded, oftentimes less volatile investments, are plentiful. Although you may give up substantial liquidity, the potential for cash flow and capital gain makes some of these alternative investments more desirable and may potentially be more appropriate for many of us.
Registered Representative of and Securities offered Through QA3 Financial Corp., Member FINRA/SIPC. Investment Advisor Representative of and Advisory Services Offered Through QA3 Financial, LLC., an SEC Registered Investment Advisor. Strategic Advantage Financial is not affiliated with QA3 Financial Corp. |
