The Gravy Train

So you got all your money tied up in real estate, or was it stocks?
Not anymore.

Let me start with a fundamental truth … There is no such thing as a riskless investment. I mean even hiding your money in, on or under your mattress has some risk.
But officer my bed … is still in there!!! See? Not safe.

And the bank of bedtime pays you absolutely no interest at all.

Then there are standard savings accounts. You know, like the ones that pay 1% or 2% or 3% interest on a really good day. Yeah those aren’t going to help you build any kind of retirement nest egg. But they are FDIC insured. That basically means you’ll get you money back ’cause the gov’t will more if they have too. Of course your money won’t be worth as much then, but hey low risk, low return.

CDs have a slightly higher return, but you cant get at your money right away. And they are FDIC insured, too.

Then there are stocks and bonds. And I am guessing this is what most people have squirreled away.

Here is something you ought to know when you’re looking at your financial portfolio – the average returns on nice stock-based indexed mutual fund is estimated at 10-12% per year. Wooooow. Well, it’s better than a saving accounts. 10 cents for ever dollar! That’s money.

For most people that’s pretty much all there is, but if you’ve ventured a little further, you’ll find strange and exciting new terms like venture capital, angels, and qualified investor.

Angel investors are people who invest directly in small or start up companies so that they can grow or expand. Their investments generally have much more risk, and so they also have a much higher return.
Venture capital firms are similar to Angels but usually invest large sums of money later on rather than small amounts in the beginning.

Because there is a substantial amount risk most angels and VCs want to be assured that the companies they’re investing in have the potential to make 5 times their investment back in 3-5 years. That means a 400% return. Yeah its actually four hundred, ’cause you get your money and then one hundred, two hundred, three hundred, four hundred percent. It makes that 12% you’re making in you 401k on stocks look pretty pathetic. That’s because it is. The sooner you buy into a company, the more you can potentially make. And publicly traded stocks and bonds are the last stop on the gravy train. Welcome aboard investor!!! [Toot, toot] I can see you jsut barely made it. Why don’t you join the others in coach?

But wait, if this is all for real, how come you haven’t heard about it before. Because there are laws about trading securities and the gov’t doesn’t approve of ripping off naive, old people or people who don’t know anything about investment, or maybe you. And so to be on the safe side, most businesses looking for investment are generally looking for Qualified or Accredited investors. People with at least 1 million in assets or 200k – 300k in sustained annual income. Probably not you! And definitely not me. Last one on the gravy train again!

So that’s it. You are too poor. You can’t even get on that train. But wait this is America. I have the right to make rediculously crazy investments in businesses that could potentially fail and lose everything I put into them. Yes, you do.

There are all sorts of private business arrangements that don’t involve the Government regulations at all. But your investment advisor may not know much about it. And he may not even be able to advise you on it, for legal reasons. And if you ask your stock broker he’ll just get confused. Private opportunities are all over the place. And they may not come looking for you, but that doesn’t mean you can’t go looking for them!

So you have al sorts of private investment options like your neighbor with the genius business idea or your old college buddy who needs some funding to expand.

But what if you dont have enough money to make it fly on your own. There are these little things called Investment clubs – groups of people who come together and pool their money and vote on the investments they want to make. Sometimes its just stocks and bonds, but it could just as easily be startup businesses. Invest ments like this are high risk and you can lose everything, but when you see the way the stock market is going, you can lose a lot there too.

Just don’t put all your money in one place, be sensible about where you invest and maybe balance your portfolio with a high risk / high return angel investment. Generally speaking risk and potential for return together. That means if it’s safe like your mattress, you’re not making much on it. But if it is risky, and a good investment then you can make like a boat load. Maybe like a train load. Who knows, maybe you’l be driving the gravy train.

What? Isn’t it Tuesdday today? Ooops.

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