Purchasing a property in France has always been viewed as a lifestyle investment for the many who love the country’s cuisine, wine and the general way of life. Since the nation is one of the most popular international tourist destinations, it has naturally become one of the most well-known and sought-after investment areas in the world. This is why being part of the French property investment world is seen as one of the most profitable undertakings by many individuals with a keen eye for hefty returns.
While there are various reasons why people buy properties in France, property investors zero in on solid rental returns and exceptional capital growth which for over seven years has continued on average double digit rates, states online portal FrenchEntrée. The most popular areas for property investors are Paris, Cote d’Azur and the Alps. Even though the potential to purchase properties is hindered by supply and building restrictions, the long-term outlook continuously appeals to property investors.
Where to invest in France
As with all property purchases, choosing the location of your property is extremely crucial. The idea is to search for a property in an area that is not yet pricey but is being gradually discovered by tourism. But one of the most practical French property investment strategies is to buy in areas where many people go to on holiday in large numbers or where there is an abundance of jobs, where communications and access are excellent and where there is a flourishing domestic economy.
Letting your French property
If you already have acquired an investment property in France, the next thing you want is to make it pay its way. You can do this by renting your property. In general, a property located in a French city provides a better opportunity to successfully let it for a long term while one that’s situated in a rural area is more suitable for short-term letting. Since France is typically every tourist’s dream destination, you are well-positioned for a healthy rental income.
Get in touch with others in your area that rent their properties, try to determine typical rents and think about speaking with rental and lettings agents. You can also have a professional survey done on the property and have them inform you of its earnings potential.
One of the most well-known ways to let out a property in France is through a leaseback. Known as a good long-term investment in the UK, a leaseback can have rental yields of 5.5-6% but the main thing to consider is the viability of the investment. Thus it becomes crucial that you look at the site yourself so you get the assurance that the strong rental return figures are strong indeed. Under a leaseback scheme, the shortest lease available is 9 years. With a French property investment scheme, you need to make sure that you get indemnity insurance prepared as well as the typical buildings and contents insurance.
If you have chosen a French property investment carefully, you will now have a property in France in an appealing location. To ensure capital gain on the property, it is recommended that your investment outlook is long-term.
December 31st, 2009
posted in Property Investment
BREAKING ALL THE RULES! Exclusive World Class Investments to Help Double Your Net Worth and to Establish Your Legacy!!
Cabal Capital Management, LLC announces the launch of the Legacy Fund which provides special alternative investment opportunities into extremely low risk, and very high financial return Advanced High Income Generation Projects through direct investments.
This fund which is not a private equity fund is unlike all other investment pool funds that exist today by offering investments that are focused on both strategic and tactical investment opportunities into Highly Advanced Income Generating Project(s) producing crucial and vital, very high demand commercially valued product(s) that are being sold directly into the largest “Major” Universal Demand Markets in the world. These investments allow risk adverse accredited investors the ability to participate in the revenues generated from these projects which allows for and achieves both capital growth and preservation, while providing the investor an extremely low risk opportunity with the benefit of dependable and sustainable alpha generation and the long term growth from these projects. These fully integrated projects have been designed to last 40 to 50 years or longer for their life cycles regardless of the global financial and credit markets.
Our fund is well positioned to effectively tap into these markets to the benefits of our investors. The growth dynamics of the United States and Western Europe is based upon local, regional and domestic consumption of all the products these projects produce. This fund is targeting routine and consistent annual double digit returns (15 – 21%) to investors un-correlated to all securities, commodities, currencies and the credit markets themselves since there will not be any exposure to these markets. All project investments within this special investment vehicle have been specifically developed and designed to perform across various business cycles regardless of global economic conditions to include recessionary and depressionary environments as well.
The current global credit crisis, current stock market contractions and wild swings in the commodities markets does not and will not impact our ability to produce consistent annual double digit returns now or in the future for our investors since we will never have, need or rely on the credit markets to establish margin accounts or leveraged positions which most all hedge fund type investment vehicles require to operate. We do not require nor will we ever utilize prime services which the large investment banks provide (Bear Stearns, Lehman Brothers, Merrill Lynch, etc.). We do not rely on the stock, commodity or currency exchanges to generate income since we can not control any of the events occurring in those exchanges for our investors, thus we are totally un-correlated to all securities, commodities, currencies and credit markets.
In the case of Deflationary and or Inflationary Markets, they will have no real effect on these projects and the products they produce. Coincidentally inflation will only increase the value of the products coming out of the projects. Deflationary markets will have very minimal impact on the products produced within these projects since these products are and always will be vital for any country to maintain a stable economy, thus they will always be in very high demand through out the world regardless of the global economic conditions.
Risk issues are always addressed through risk management and the review procedures for each and every investment made. Unlike most projects which have been developed, planned and master planned, every assumption for each project invested in has been tested, validated, verified and proven or it’s not incorporated into these project(s). Each and every project is also backed up by a detailed Input / Output Financial Cash Model which is a detailed Program / Project Financial Blueprint that shows the quarterly inter-relationships of investments, operational production revenues, operational expenses at all levels, taxes, imposts and fees, special circumstances events, and financial obligations during the life of the Program / Project.
Since energy production and consumption is the key element to any industrialized country, and with energy consumption increasing globally at an annual rate of 5 – 6 %, energy is and always will be vital to both the U.S. and Western European Economies. Allocating to Energy and Bio-Fuels production are two major key areas of involvement and investments within our seven pronged program investment strategies approach, which consists of the following options available to us: Energy: Oil & Gas (Example Project to follow), Bio Fuels: Algae Based Bio-Diesel and Jatropha Curcas {plant} direct fuel source. Algae Based Bio-Diesel is a direct fuel source currently available and ready for full scale production and delivery {This is Direct Fuel Source and is not a blend for gasoline or other fuel sources!} Algae Based Bio-Diesel Fuel production utilizes proprietary photo enhanced, micro nutrient enhanced, continuous flow, automated, sensor quality controlled, bio-chemical industrial processes and then are pressed, centrifuged, oils separated from water, water treated, cooked, cracked and treated all within a 12 hour cycle (Start to Finish) to complete one batch made ready for use in any diesel engine. Initially 270 Million Gallons per quarter to several Billion Gallons of bio-diesel per quarter will be produced depending upon the initial size of a project program. This Algae Based Bio-Diesel Fuel source has a Cetane Rating of 105 -117 compared to 80 – 85 Cetane Rating for #1 diesel fuel currently produced by all the major oil companies, which provides more power, better millage and performance while emitting 60 – 70% less emissions across the board vs. normal standard crude oil based diesel fuels. Algae Based Bio-Diesel emits no sulfur and or nitrogen into the atmosphere, Alternative Energy: Solar / Concentrated Solar Thermal Power Production, Wind and Electric Fuel Cell Systems, Natural Resources: Gold, Platinum and other Precious Metals Groups and Diamond Mining: Refining, Assaying, Separation using advanced physical technologies and Bullion production of Gold and Platinum as well as Processing, Cutting, Valuation Appraisals of Diamonds and other Precious Stones, Water: Proprietary Water Science / Technology to Produce Fresh Drinking Water to meet Agricultural, Industrial and Human Public Health needs in critically water short areas through Water production, bottling facilities and distribution. This can be accomplished with any available water supply {in ground water tables, above and below ground reservoirs with a high saline content normally not recommended for human consumption}, Sea Waters & Brackish Waters anywhere Globally, Hydroponics: Food Production: Fish Shrimp, Prawns, Fruits Vegetables utilizing USDA inspectors to garner Grade A Choice Status to include direct marketing into Major U.S.A. and International Consumer Demand Markets, and Special Opportunities: Aviation Fuels: JP-1 to JP-12 for Commercial and Military Applications from Algae Based Direct Fuel Sources as well as Advanced Hyper-Speed Information Technologies and other Advanced High Income Generation Project Opportunities as they become available.
It should be noted that traditional large project investments consist normally of only one income generation production element and typically requires three years at the earliest before the investors see any type of modest return on their investment. Our projects produce immediate results in the first year due to their very nature and global demand. These Exclusive World Class Projects which are available to us for investments have no less than 2, but normally include 5 or more Major Integrated Income Production Elements within each project. It should also be noted that each income producing element within these projects are so strong that they could stand on their own and support the entire project, which is why many of these elements are developed together to form an Advanced Integrated Income Generation Project depending upon the requirements and location of the program.
All of the projects that this special opportunity fund invests in involve Proprietary Advanced Technologies and Advanced Physical Science / Processes (not known to the great majority of Asset Manager Companies Staffs). Other types of investment pool managers, hedge funds, etc. do not know or even have access to these world class development engineering people and the technologies assets and projects that they develop, implement and manage. Currently we have in excess of $10 Billion Dollars worth of Advanced High Income Generation Projects available to us for investments.
Another Special Note of consideration is that each investment will bring with it potential tax advantages not typically found with other types of investments. Depending on where the project(s) are located and how the project are legally structured and set up (Development Corporations, Development Authorities, etc. which are authorized by local, state or federal governments) could result in tremendous tax advantages, which each investors tax advisor will need to qualify and determine the best approach for each investors own tax liabilities depending upon their current tax status, situation and strategies.
These projects are developed, implemented and managed by Highly Reliable, Senior Internationally Experienced Technical Managers, Senior Science Managers and Senior Logistics / Project Security Management Staffs, which have planned, developed, evaluated and trouble-shot economic development projects and strong income generation projects in over 65 countries during the past 40 years.
There are in excess of 300 Top Level Executive Technical Managers with over 30 years of Experience in each of their perspective Development Sectors available for all projects that our fund invests in. These projects are designed to insure extreme depth of expertise and experience management which is available to any project at any and every stage of the project program, regardless of location of the project anywhere globally.
The results of this Special Investment Vehicle fund are highly advantageous investment opportunities that by far exceed the majority of investment opportunities available to investors from a financial return as well as extremely low risk standpoint by investing in Outstanding Advanced High Income Generation Projects carried out by highly reliable and responsible individuals and organizations.
Face to face meetings are welcomed and encouraged in order to quantify, qualify, verify and validate these investment opportunities which stem from the Americana way of project development and implementation with the application of Science, Engineering, Logistics, Security and Management which dates back to over 200 Years during the American Expansion of the United States of America. Never before in the history of mankind has the shear number and sizes of these Universal Demand Markets through out the world been in place and more importantly, primed and ready to handle and accept these vital and crucial very high demand, commercially valued products coming from these projects; Available for immediate investment. ** (dual element example project within a fully integrated project to follow)
Headquartered in San Antonio, Texas, Cabal Capital Management, L.L.C. is managed by Kent Sullivan: www.cabalcapitalmanagement.com
** Fully Integrated Oil & Gas / Real Example Project:
This Oil & Gas production program is headed up by a Top Level Senior International Consultant which is an Oil and Gas Industry Executive who has been involved in the Oil & Gas Industry over the past 50 years. This Oil & Gas Executive is the Systems Developer, Scientist, Equipment Designer and Engineer who is recognized as an expert in his field by the U.S. Department of Energy who also has called him upon him frequently in the past to trouble shoot particular Oil and Gas fields as a technical advisor and as a trouble shooter to rectify any and all problems associated with troubled oil and gas production fields.
This Top Senior International Consultant has a proprietary and proven 12 step methodology for siting, drilling, completing and production techniques for all wells. He has a historical commercial success rate of 92% for bringing in all of his wells sited, drilled, completed and producing which also has a normal life span of 15 to 20 plus year’s worth of production.
This Advanced High Income Generation Oil and Gas project is comprised of the following:
A Top Down Electric Air Hammer System which is highly sensorized with Professional Engineers and Scientists managing all operational positions. These auto sensor rigs provide detailed information by satellite to a centralized operations and training center where all decisions are made by people with 45 – 50 years of successful completion and production experience.
Each oil and gas well completed will be drilled in both soft and hard rock beds and will vary in depths from 3,000 feet to over 13,000 feet. All wells in this program will be completed initially in the state of Texas, in the United States of America.
Typical production wells will produce 60 barrels of oil per day to 500 – 600 barrels of oil per day and the gas wells will produce in a typical range of 2 million cubic feet of natural gas per day to in excess of 20 million cubic feet of natural gas per day. The total net operating investment will be returned within 4 months of production for each well.
Multiple producing formations will be completed and isolated with proprietary tools and instruments which will be operated simultaneously through out the life of the wells. The typical life of these well are 15 – 20 years because of the 12 different proprietary methods used for siting, drilling, completion and production techniques, tools, proprietary materials and instruments used on each and every well which prevents formation damage and increases the life cycle of each well to maximize the highest production obtainable.
This program consists of hundreds of oil and gas wells sited, drilled, completed and in production within a 1 – 2 year period. These wells will be sited, drilled and completed in historically very well known and documented oil and gas producing formations within the state of Texas, in the United States of America.
Investors will receive an estimated 15 – 21% annual return per year on their investment, with payments coming at the end of each year from this program. The threshold investment will be an aggregate amount of $400 hundred million dollars which is what the minimum program investment calls for.
Estimated program revenues are based on $60 dollars a barrel and $6.5 dollars per thousand cubic foot of natural gas. Over the last year crude oil (West Texas Intermediate) has sold as low as $50 dollars a barrel up to as much as $147 dollars a barrel. Over the past year natural gas has sold from $5.5 dollars a thousand cubic foot to $11.3 dollars per thousand cubic foot.
Example Oil & Gas Well Profile: One well; properly sited, drilled, completed and producing will conservatively produce 100 barrels of oil per day and 4 million cubic foot of natural gas per day. This provides the overall program (100 barrels x $60 per barrel = $6,000) $6,000 dollars per day of revenue. Each 4,000 cubic foot of natural gas (4,000 x $6.5 per thousand cubic foot = $26,000) $26,000 dollars per day of revenue. Total revenue for this example is estimated at $32,000 dollars per day of program revenue for this example.
** All wells in this program will not produce the same **
Each month this represents a program return of (30 days x $32,000 = $960,000) $960,000 dollars of revenue coming from this one (1) example well. The investment program we are offering involve several hundreds of program wells being sited, drilled, completed and operating within a 1 to 2 year period.
Remember, this is only two elements of a fully integrated Advanced High Income Generation Project which will involve in most cases several other elements (normally 5 or more) to generate very substantial amounts of revenues over the course of the project life. With the combination of several other Advanced High Income Generation Elements within one project, this will enhance the financial returns and revenues of the program itself, and thus will also greatly reduce and virtually eliminate any associated risk due to the diversification of the different Major Income Generation elements within each project.
Once again, the result of this Special Investment Vehicle fund are highly advantageous investment opportunities that by far exceed the majority of investment opportunities from a financial return and an extremely low risk standpoint by investing in Outstanding Advanced High Income Generation Projects.
Headquartered in San Antonio, Texas, Cabal Capital Management, L.L.C. is managed by Kent Sullivan: www.cabalcapitalmanagement.com
December 31st, 2009
posted in Investment News
Sharia-Compliant Fund Providing Extremely Low Risk Investments and Consistent Annual Double Digit returns for 10 – 20 – 30 Years!Cabal Capital Management, LLC announces the launch of the Legacy Fund which provides special alternative investment opportunities into extremely low risk, and very high financial return Advanced High Income Generation Projects through direct investments.
This fund which is not a private equity fund and is Sharia-Compliant is unlike all other investment pool funds, hedge funds, etc. that exist today by offering investments that are focused on both strategic and tactical investment opportunities into Highly Advanced Income Generating Project(s) producing crucial and vital, very high demand commercially valued product(s) that are being sold directly into the largest “Major” Consumer Universal Demand Markets in the world. These investments allow risk adverse accredited investors the ability to participate in the revenues generated from these projects which allows for and achieves both capital growth and preservation, while providing the investor an extremely low risk opportunity with the benefit of dependable and sustainable alpha generation and the long term growth from these projects. These fully integrated projects have been designed to last 40 to 50 years or longer for their life cycles regardless of the global financial and credit markets.
Our fund is well positioned to effectively tap into these markets to the benefits of our investors. The growth dynamics of the United States and Western Europe is based upon local, regional and domestic consumption of all the products these projects produce. This fund is targeting routine and consistent annual double digit returns (15 – 21%) to investors un-correlated to all securities, commodities, currencies and the credit markets themselves since there will not be any exposure to these markets. All project investments within this special investment vehicle have been specifically developed and designed to perform across various business cycles regardless of global economic conditions to include recessionary and depressionary environments as well.
The current global credit crisis, current stock market contractions and wild swings in the commodities markets does not and will not impact our ability to produce consistent annual double digit returns now or in the future for our investors since we will never have, need or rely on the credit markets to establish margin accounts or leveraged positions which most all hedge fund type investment vehicles require to operate. We do not require nor will we ever utilize prime services which the large investment banks provide (Bear Stearns, Lehman Brothers, Merrill Lynch, etc.). We do not rely on the stock, commodity or currency exchanges to generate income since we can not control any of the events occurring in those exchanges for our investors, thus we are totally un-correlated to all securities, commodities, currencies and credit markets.
In the case of Deflationary and Inflationary Markets, they will have no real effect on these projects and the products they produce. Coincidentally inflation will only increase the value of the products coming out of the projects. Deflationary markets will have very minimal impact on the products produced within these projects since these products are and always will be vital for any country to maintain a stable economy, thus they will always be in very high demand through out the world regardless of the global economic conditions.
Risk issues are always addressed through risk management and the review procedures for each and every investment made. Unlike most projects which have been developed, planned and master planned, every assumption for each project invested in has been tested, validated, verified and proven or it’s not incorporated into these project(s). Each and every project is also backed up by a detailed Input / Output Financial Cash Model which is a detailed Program / Project Financial Blueprint that shows the quarterly inter-relationships of investments, operational production revenues, operational expenses at all levels, taxes, imposts and fees, special circumstances events, and financial obligations during the life of the Program / Project.
Since energy production and consumption is the key element to any industrialized country, and with energy consumption increasing globally at an annual rate of 5 – 6 %, energy is and always will be vital to both the U.S. and Western European Economies. Allocating to Energy and Bio-Fuels production are two major key areas of involvement and investments within our seven pronged program investment strategies approach, which consists of the following options available to us: Energy: Oil & Gas (Example Project to follow), Bio Fuels: Algae Based Bio-Diesel and Jatropha Curcas {plant} direct fuel source. Algae Based Bio-Diesel is a direct fuel source currently available and ready for full scale production and delivery {This is Direct Fuel Source and is not a blend for gasoline or other fuel sources!} Algae Based Bio-Diesel Fuel production utilizes proprietary photo enhanced, micro nutrient enhanced, continuous flow, automated, sensor quality controlled, bio-chemical industrial processes and then are pressed, centrifuged, oils separated from water, water treated, cooked, cracked and treated all within a 12 hour cycle (Start to Finish) to complete one batch made ready for use in any diesel engine. Initially 270 Million Gallons per quarter to several Billion Gallons of bio-diesel per quarter will be produced depending upon the initial size of a project program. This Algae Based Bio-Diesel Fuel source has a Cetane Rating of 105 -117 compared to 80 – 85 Cetane Rating for #1 diesel fuel currently produced by all the major oil companies, which provides more power, better millage and performance while emitting 60 – 70% less emissions across the board vs. normal standard crude oil based diesel fuels. This Algae Based Bio-Diesel product emits no sulfur and or nitrogen into the atmosphere, Alternative Energy: Solar / Concentrated Solar Thermal Power Production, Wind and Electric Fuel Cell Systems, Natural Resources: Gold, Platinum and other Precious Metals Groups and Diamond Mining: Refining, Assaying, Separation using advanced physical technologies and Bullion production of Gold and Platinum as well as Processing, Cutting, Valuation Appraisals of Diamonds and other Precious Stones, Water: Proprietary Water Science / Technology to Produce Fresh Drinking Water to meet Agricultural, Industrial and Human Public Health needs in critically water short areas through Water production, bottling facilities and distribution. This can be accomplished with any available water supply {in ground water tables, above and below ground reservoirs with a high saline content normally not recommended for human consumption}, Sea Waters & Brackish Waters anywhere Globally, Hydroponics: Food Production: Fish Shrimp, Prawns, Fruits Vegetables utilizing USDA inspectors to garner Grade A Choice Status to include direct marketing into Major U.S.A. and International Consumer Demand Markets, and Special Opportunities: Aviation Fuels: JP-1 to JP-12 for Commercial and Military Applications from Algae Based Direct Fuel Sources as well as Advanced Hyper-Speed Information Technologies and other Advanced High Income Generation Project Opportunities as they become available.
It should be noted that traditional large project investments consist normally of only one income generation production element and typically requires three years at the earliest before the investors see any type of modest return on their investment. Our projects produce immediate results in the first year due to their very nature and global demand. These Exclusive World Class Projects which are available to us for investments have no less than 2, but normally include 5 or more Major Integrated Income Production Elements within each project. It should also be noted that each income producing element within these projects are so strong that they could stand on their own and support the entire project, which is why many of these elements are developed together to form an Advanced Integrated Income Generation Project depending upon the requirements and location of the program.
All of the projects that this special opportunity fund invests in involve Proprietary Advanced Technologies and Advanced Physical Science / Processes (not known to the great majority of Asset Manager Companies Staffs). Other types of investment pool managers, hedge funds, etc. do not know or even have access to these world class development engineering people and the technologies assets and projects that they develop, implement and manage. Currently we have in excess of $10 Billion Dollars worth of Advanced High Income Generation Projects available to us for investments.
These projects are developed, implemented and managed by Highly Reliable, Senior Internationally Experienced Technical Managers, Senior Science Managers and Senior Logistics / Project Security Management Staff. There are in excess of 300 Top Level Executive Technical Managers with over 30 years of Experience in each of their perspective Development Sectors available for all projects that our fund invests in. These projects are designed to insure extreme depth of expertise and experience management which is available to any project at any and every stage of the project program, regardless of location of the project anywhere globally.
We understand that most Investors, Sovereign Wealth Funds, Major International Banks, Hedge Funds, Fund of Funds, Private Equity Funds and others do not have the technical resources, capability, background and or understanding to evaluate, determine and differentiate between good and bad Large Advanced High Income Generation Projects, Project Developers, Project Implementation Capability and Management of Highly Integrated Multiple Income Steam Revenue Generation Projects.
This is the strength of the Asset Manager and where he excels; during the past several years he has been mentored, tutored and trained by some of the oldest and most highly respected, responsible, highly sought after and experienced Development Engineers who have planned, master planned, developed, managed, evaluated and trouble shot Economic Development Projects, Strong Multiple Stream Income Generation Projects, conducted Nation Building and Humanitarian Projects in over 65 countries during the past 40 years. The training he has received allows him to thoroughly review, comprehend and evaluate Project Development, Project Implementation, Logistics, Security and Management of these projects as well as the risk management associated with each potential investment. This process has provided him with the understanding, knowledge and insights of Project Development, Implementation, Logistics Operations and Infrastructure development of large income generation projects to determine unequivocally, which Highly Advanced Income Production Projects are viable and which ones are questionable investments at best.
Another Special Note of consideration is that each investment will bring with it potential tax advantages not typically found with other types of investments. Depending on where the project(s) are located and how the project are legally structured and set up (Development Corporations, Development Authorities, etc. which are authorized by local, state or federal governments) could result in tremendous tax advantages, which each investors tax advisor will need to qualify and determine the best approach for each investors own tax liabilities depending upon their current tax status, situation and strategies.
The results of this Special Investment Vehicle fund are highly advantageous investment opportunities that by far exceed the majority of investment opportunities available to investors from a financial return as well as extremely low risk standpoint by investing in Outstanding Advanced High Income Generation Projects carried out by highly reliable and responsible individuals and organizations.
Face to face meetings are welcomed and encouraged in order to qualify, verify and validate these investment opportunities which stem from the Americana way of project development and implementation with the application of Science, Engineering, Logistics, Security and Management which dates back to over 200 Years during the American Expansion of the United States of America. Never before in the history of mankind has the shear number and sizes of these Consumer Universal Demand Markets been in place and more importantly, primed and ready to handle and accept these vital, crucial and very high demand, commercially valued products coming from these projects.
Headquartered in San Antonio, Texas, Cabal Capital Management, L.L.C. is managed by Kent Sullivan: www.cabalcapitalmanagement.com
** Fully Integrated Dual Element – Oil & Gas / Real Example Project **
This Oil & Gas production program is headed up by a Top Level Senior International Consultant who is an Oil and Gas Industry Executive which has been involved in the Oil & Gas Industry over the past 50 years. This Oil & Gas Executive is the Systems Developer, Scientist, Equipment Designer and Engineer who is recognized as an expert in his field by the U.S. Department of Energy who also has called him upon him frequently in the past to trouble shoot particular Oil and Gas fields as a technical advisor and as a trouble shooter to rectify any and all problems associated with troubled oil and gas production fields.
This Top Senior International Consultant has a proprietary and proven 12 step methodology for siting, drilling, completing and production techniques for all wells. He has a historical commercial success rate of 92% for bringing in all of his wells sited, drilled, completed and producing which also has a normal life span of 15 to 20 plus year’s worth of production.
This Advanced High Income Generation Oil and Gas project is comprised of the following: A Top Down Electric Air Hammer System which is highly sensorized with Professional Engineers and Scientists managing all operational positions. These auto sensor rigs provide detailed information by satellite to a centralized operations and training center where all decisions are made by people with 45 – 50 years of successful completion and production experience.
Each oil and gas well completed will be drilled in both soft and hard rock beds and will vary in depths from 3,000 feet to over 13,000 feet. All wells in this program will be completed initially in the state of Texas, in the United States of America.
Typical production wells will produce 60 barrels of oil per day to 500 – 600 barrels of oil per day and the gas wells will produce in a typical range of 2 million cubic feet of natural gas per day to in excess of 20 million cubic feet of natural gas per day. The total net operating investment will be returned within 4 months of production for each well.
Multiple producing formations will be completed and isolated with proprietary tools and instruments which will be operated simultaneously through out the life of the wells. The typical life of these well are 15 – 20 years because of the 12 different proprietary methods used for siting, drilling, completion and production techniques, tools, proprietary materials and instruments used on each and every well which prevents formation damage and increases the life cycle of each well to maximize the highest production obtainable.
This program consists of hundreds of oil and gas wells sited, drilled, completed and in production within a 1 – 2 year period. These wells will be sited, drilled and completed in historically very well known and documented oil and gas producing formations within the state of Texas, in the United States of America.
Investors will receive an estimated 15 – 21% annual return per year on their investment, with payments coming at the end of each year from this program. The threshold investment will be an aggregate amount of $400 hundred million dollars which is what the minimum program investment calls for. A $10 Million dollar minimum investment is the entry point for this program, with all others being on a case by case basis.
Estimated program revenues are based on $60 dollars a barrel and $6.5 dollars per thousand cubic foot of natural gas. Over the last year crude oil (West Texas Intermediate) has sold as low as $50 dollars a barrel up to as much as $147 dollars a barrel. Over the past year natural gas has sold from $5.5 dollars a thousand cubic foot to $11.3 dollars per thousand cubic foot.
Example Oil & Gas Well Profile: One well; properly sited, drilled, completed and producing will conservatively produce 100 barrels of oil per day and 4 million cubic foot of natural gas per day. This provides the overall program (100 barrels x $60 per barrel = $6,000) $6,000 dollars per day of revenue. Each 4,000 cubic foot of natural gas (4,000 x $6.5 per thousand cubic foot = $26,000) $26,000 dollars per day of revenue. Total revenue for this example is estimated at $32,000 dollars per day of program revenue for this example.
** All wells in this program will not produce the same **
Each month this represents a program return of (30 days x $32,000 = $960,000) $960,000 dollars of revenue coming from this one (1) example well. The investment program we are offering involve several hundreds of program wells being sited, drilled, completed and operating within a 1 to 2 year period.
Remember, this is only two elements of a fully integrated Advanced High Income Generation Project which will involve in most cases several other elements (normally 5 or more) to generate very substantial amounts of revenues over the course of the project life. With the combination of several other Advanced High Income Generation Elements within one project, this will enhance the financial returns and revenues of the program itself, and thus will also greatly reduce and virtually eliminate any associated risk due to the diversification of the different Major Income Generation elements within each project.
Once again, the result of this Special Investment Vehicle fund are highly advantageous investment opportunities that by far exceed the majority of investment opportunities from a financial return and an extremely low risk standpoint by investing in Outstanding Advanced High Income Generation Projects.
Headquartered in San Antonio, Texas, Cabal Capital Management, L.L.C. is managed by Kent Sullivan: www.cabalcapitalmanagement.com
December 29th, 2009
posted in Investment News
One of the most profitable investments during these tough economic conditions across the world has been gold. There has been a sharp rise in the price of gold over the last one year, which has led to increasing investor interest in the yellow metal. Today, one of the most popular routes to invest in this precious metal has been the exchange traded fund (ETF). Using ETFs enables investors to get an exposure to gold in their portfolio. While looking at this route there are also some other details that have to be considered for the purpose of ensuring that all angles related to the investment are covered.Gold ETFThere are several gold ETFs that have been launched by mutual funds in the country. These are mutual fund schemes that are listed on the stock exchanges and an investor can buy and sell the units in the scheme just like he/she trades a stock. The transactions in an ETF can be done at any time during the day when the stock exchange is open for business, and hence it provides an element of flexibility for the investor. The best part of the investment is that the investor does not have to wait till the end of the day for the value to be known and he/she can make use of the price change that takes place during the day to benefit from the changing situation.Linked to GoldThe main theme of the entire investment is that the price of the ETF is linked to the price of gold. This means that when an investor is buying an ETF, he/she has a direct exposure to the price of gold. Whenever the investor feels that the price of gold is going to rise and he/she would like to benefit from the move then he/she can buy the gold ETF and then gain from the rise when it occurs. The other point is also that transacting in this route is cheap because the cost for the investor is just the brokerage fee that he/she will pay for the transaction. In addition, there is the management expense of the fund, but this is low and is directly adjusted in the net asset value, so the investor does not have to pay this separately.LimitationThe benefit that is witnessed in the form of gold ETF also represents a sort of limitation for the investor. This is because the instrument is appropriate in order to gain from the rise in the value but at the same time this cannot help an investor profit in case there is going to be a fall in the value of gold.There are times when the investor might also have a view that the price of gold may fall and in several cases he/she might be correct in such an assessment too. In such a situation, the investor would like to ensure that he/she gains from the knowledge of this expected price movement. If investors want to ensure that they make use of only the gold ETF then there is nothing that they can do in terms of gaining from such a view because in case of a price fall the gold ETF will also come down. Investors cannot sell such units without having them in their portfolios. This is different from the use of gold futures where these can be sold to gain from a fall in price.However, investors can try and ensure that they do not end up losing when the price of gold actually falls. This can be done by selling off the existing gold ETF holding before the expected price reduction. In case the price actually falls as per the expectation then the investors can buy the units again and gain when the price rises in the future. However, it is not necessary that the prices have to rise after a certain fall and it can be quite some time before there is actually another rise in the price of the metal. In such a situation, this route is inadequate for the investor who would have no option but to turn to the futures market.At the same time, even though there are liquidity features in the gold ETF, investors have to understand that there has to be significant price movements to justify regular trading in such units. In that sense, for a normal small investor the gold ETF is a medium- to long-term investment.
December 27th, 2009
posted in Gold Investment
The chief goals of any property investment are appreciation, cash flow and tax savings. Rental property investment is the only property investment that provides you all these three benefits at the same time.
The main rental property categories consist of single family rental properties, multi-unit residential rental properties, commercial rental properties and holiday homes. The first category includes long term single family renting, the second category includes apartments, buildings for multiple families while the last category includes shopping centers, office buildings etc. for a long tem renting purpose. Here are other points to consider with real property investments:
1) Methods like repossessions, ugly homes, and probate homes are useful for buying property. Lease purchases can be extremely useful which help you to leverage investment money and reach a positive cash flow from renting. Buying fixer upper homes or repossessions can help to reduce investment money and improve cash flow and appreciation.
2) One cannot expect a considerable cash flow from property with one tenant. In this case, the main goal is to cover the mortgage and current expenses.
3) Research on a potential rental home should include significant financial planning for years ahead, like expenses of property management, repairing, vacancy, emergency etc.
4) The apartment and the 2-4 unit homes are the main classes of the multi-unit residential property investments.
5) With apartment investments the main profit comes from the rental cash flow. A lease to purchase option and leveraging investment money is quite useful in this case. The most significant factors in this case are the financial evaluation and property management. With a steady cash flow from a number of tenants, it is possible to hire a manager for the property management. It helps to increase the cash flow and the value of the apartment building. Underestimation may damage the investment and lead to loss.
6) Commercial properties investments include office buildings, retail shopping centres, industrial properties and the like. The market value of these properties is decided on the cash flow (net rental income). The main objective of rental in these cases is to generate enough cash to exceed the cost of mortgage, insurance, maintenance, future improvements. This is not an easy task to handle. It requires analysis of many things. But if done properly it could prove to be lucrative. Changes in the economic conditions usually have a pronounced impact on these types of real estate investments than on residential property investments. And as office buildings and industrial properties are more susceptible to these changes, it is wise to keep extra capital to support those investments if something does not go as expected. In this case, a money-leveraging approach (lease to purchase option) is very useful.
7) A holiday home can be used in two ways. It can be a property home or an investment property. This category includes resort properties, mountain homes, or beach homes. With holiday rentals, the main profit comes from the appreciation. Cash flow generated from renting is usually used for current expenses like property management, mortgage and insurance. These are short-term rentals and require intensive maintenance.
December 26th, 2009
posted in Property Investment
Kicking off the evaluation process is the toughest for us. Question after question kept popping up “Is the property market low enough?”, “Is this property worth considering?”, “Are the numbers the only criteria for investment?” What are we really looking for in real estate investing?? Quick bucks $$ or Regular income…Bottom-line = Money!!!Property Agents have tons of recommendations for YOU! How will you know whether they are good investment for you?There are many factors that need to be considered in evaluating a real estate investment. For example, location, environment/neighborhood, facilities, financing options, rental income, etc. If all above works, it is time calling your agents and set up appointments. Happy Viewings!!!!Actually it is not difficult and it does not need much of your time to know if a real estate investment is worth investing in the first place. All you need is crunching some numbers with your calculator, and Bingo! You can decide whether the property is worth investing.Later in this article, we will show you how these numbers work in your prospective real estate investment by two real life cases in Johor Bahru, Malaysia.Numbering GAMENumbers, numbers and numbers.. How do you get them?You may try calling a few property agents, check with banks on properties valuations and of course there is plenty of information on the Internet. Once you have these numbers you can determine if a real estate investment is worth spending your time for a viewing. “Seeing is Believing.” Check out the property to see the actual condition and the environment, whether it is to your liking once you get your numbers RIGHT! Once you get your numbers, you will see:IncomesOne-time income – selling priceRegular income – rental priceCostsOne-time expenses (startup costs) – down payment, agent’s brokerage, legal fees, stamp duty, furnishing cost, etc.Regular expenses (monthly costs) – monthly loan repayment, monthly maintenance fee, quit rent, property tax, etc.See how they (numbers) work..The basic requirement for a good real estate investment is that the income it generates must be more than its costs.If the selling price of a real estate investment is more than its purchase price and startup costs, this investment generates capital gain. If the rental income of a real estate investment is more than its monthly expenses, this investment generates cash flow. If you are looking for capital gain, the gain or loss depends very much on the real estate market. Hoping to make money from capital gain on real estate is like buying a product and hoping the value of the product will go up with time. On a long term basis, real estate will be appreciating in value because of inflation, but the gain is not guaranteed.On the other hand, a real estate investment that generates cash flow effectively put money into your pocket every month, while your equity in the real estate investment increases over time. This is the real estate investment that we are looking for – an investment worth investing.Too good to be true?With this recession time, you will ask yourself, “Is it the RIGHT time for me to start investing in real estate? Everything is so uncertain NOW.” In Johor Bahru, you can find plenty of real estate investments worth investing at this juncture. We discovered most of these investments that generate substantial cash flow are mainly apartments or condominiums. You can read from our upcoming article to know why apartments or condominiums are better real estate investments in Johor Bahru. Here are two recent real life cases of real estate investments worth investing in Johor Bahru.Case 1: We found a condominium in Larkin area of Johor Bahru in Octorber 2008 selling at $160,000 with existing tenant. Monthly rental income is $1400 while monthly maintenance cost is around $300 (maintenance fee plus sinking fund plus quit rent). If we finance 90% of the purchase price to buy this condominium with interest rate 4.85% with a tenure of 30 years, monthly loan repayment is estimated to be $760. Thus, this condominium is generating a net cash flow of $340 every month, $4080 every year. Total capital outlay for this investment is $24,000 for down payment including other startup costs like legal fee and brokerage. Effectively this investment gives us a yearly cash-on-cash return of 18.5%. In other words, within 6 years we would be able to take back our capital $24,000! The best thing is we still own the condominium. It will keep putting money into our pocket every month. We also have the option to sell it away when the market is good.Case 2: There is a 3-rooms apartment in Tampoi sold at $125,000 in Octorber 2008. Monthly maintenance cost is about $150. If we finance 90% of the purchase price with interest rate 4.85% with a tenure of 30 years, monthly loan repayment is estimated to be $600. Expected rental income for a fully furnished apartment in the area is about $1200. With furnishing cost of $10,000, total capital required for this investment is around $27,000, while total monthly cost is $750. The apartment is expected to generate a net cash flow of $450 every month, $5400 every year. Cash-on-cash return on this investment is 20% which we can expect to take back all the capital within 5 years.Sound interesting right? Of course, so far we are only talking about numbers. A good real estate investment does not rely on purely numbers. You still have to go and have a look at the building structures, study the location and neighborhood, and perform other checks before you make your decision. What we have discussed, however, can save you time and give you more ideas on the potential returns of a real estate investment before you tell your agent which real estate you want to view in the coming weekend.
Read more about real estate investment tips at http://reijb.com
We write regularly about real estate investment. Some of our featured articles include:
“How to estimate the value of a property?”
“Why apartment can be the best real estate investment?”
“How important is location to an investment real estate?”
December 26th, 2009
posted in Investment News
Property investment is not a single option in itself, but it provides lots of options for you to choose the right kind of investment for you. There are lots of types like residential property investment, commercial property investment, buy to let property investment, land investment, business property investment, overseas property management and others. We can see the brief notes about these types of investments here and for more detailed information and to know what kind of property suits you the most, you can just check out our links available on this site.
Investing in Residential Property has always been a good investment for everyone as it gives a sense of security to one and gives that much required status in the society. Real estate investment has shown consistent growth in value over the years and has remained stable, even in times of crisis. Investment in real estate provides you equity and generates cash flow.
Commercial property is one of the most preferred options among the different types of investments. A commercial property is nothing but an area that is zoned for businesses. Business property, such as office buildings, medical centers, hotels, stores, etc., which are intended to operate with a profit come under the category of commercial property.
The phrase ‘buy to let’ usually refers to the investment strategy of buying a residential property to be let for profit. You buy the property not according to your need, but according to the market demand. Since the mid-nineties there has been rapid growth in the property market leading to a surge in demand for rental property.
Land investment has always been a good option, both for personal and commercial use. You have plenty of options; you can sell it at a higher rate, you can build homes and make it a residential complex, or make it a commercial complex and so on.
Business property investment is also catching up quickly, as there is a demand for commercial premises within the city and also in the suburbs of the city. The dividends are high, since they are used for commercial purpose. Apart from these things, you can also buy property abroad and keep it as your holiday home or you can rent it out through the agencies out there.
December 25th, 2009
posted in Property Investment
Gold investing is considered a great and safe long term investment. However it is not as safe as bonds and a certain degree of research has to be done before plunging into it. The reason why gold investments have a slight degree of risk involved is that the value of gold does not necessarily have to be high or stable. Gold generally is considered precious and is costly due to its rarity. If for some reason the markets are flooded with gold, it could very easily depreciate in value. However generally, its value remains stable or may even inflate with time.
You may wonder how stable exactly is gold investing. Currently, its demand far outweighs its supply. Thus gold investments seem to be the next big thing and the future seems bright for the investors. As the amount mined is barely half of its worldwide demand, the prices for gold can only rise steadily in the years ahead.
What this implies is that to avoid a severe gold shortage, the prices of gold are bound to rise. Only this will either decrease or check the tremendous demand for it, and keep it in control. However for the investor, it all adds up to being a favorable time to invest in gold.
Some other important key points you should be aware of is that you should refrain from investing all your money just in a single form of gold. You can invest in plenty of forms one being physical gold. This is the most common and includes gold in the form of ornaments, gold biscuits or slabs. This is generally how people begin and it constitutes a secure foundation to build on. However, there are other areas also that you could invest in. Gold mines in the nascent stage or better still undiscovered, potential goldmines provide a tremendous opportunity to increase your wealth.
Sometimes you may fid mines underperforming or the quantity being mined is way below its potential. But even if the mines are not producing in large amounts, due to the tremendous demand it is very possible that they could increase the quantity being mined, proving to be, a good investment.
Another advantage that mines have over physical gold is that unlike ornaments or gold slabs, mines cannot be misplaced, lost or stolen from you. Thus your investment is stable and very secure. These factors make gold investment a beneficial venture to invest your money in.
December 25th, 2009
posted in Gold Investment
If you’ve found your way here to this article, chances are you’ve either got some money socked away or you’re planning to do so.
But first things first. Why is investing a smart idea?
Simply put, you want to invest in order to create wealth. It’s relatively painless, and the rewards are plentiful. By investing in the stock market, you’ll have a lot more money for things like retirement, education, recreation — or you could pass on your riches to the next generation so that you become your family’s Most Cherished Ancestor. Whether you’re starting from scratch or have a few thousand dollars saved, Investing Basics will help get you going on the road to financial (and Foolish!) well-being.
Know your goals
What are you saving for? Retirement? College for the kids? A new speaker system complete with woofers and tweeters? An exotic animal menagerie complete with Chihuahuas (woofers) and canaries (tweeters)? A retirement villa in the sun-baked hills of Tuscany?
Say you take $2,000 of your savings and put it into the stock market. If your money returned 10% a year (the S&P 500′s historical average), two grand would be worth $34,898.80 after 30 years. That might not get you the perfect retirement home, but it’ll at least give you a down payment.
Maybe you don’t have $2,000 burning a hole in your bank account, but perhaps you can afford to invest your lunch money. Brown-bag your lunch and sock away just $4 a day, 250 days a year. It’s not a lot, but if you’re in your early 20s, you’ve got the investor’s best ally on your side — time. If you invest $1,000 once a year in an investment that averages a 10% annual return — the average annual stock market return since 1926 — it’ll grow to more than $1 million after 46 years, which is right around the time you’ll be ready to retire.
Of course, as you get older and more financially stable, you should be able to put away more to invest. Upping the ante to just $166 a month — which is probably less than lunch money plus what you pay for cable TV — would put you at the million-dollar mark in just 39 years.
The power of compounding
The table below shows you how a single investment of $100 will grow at various rates of return. Five percent is about what you might get from a certificate of deposit (CD) or with a government bond over time, 10% is about the historical average stock market return, and 15% is what you might get if you decide to learn how to pick your own stocks and take advantage of some of our lessons in advanced investing techniques.
Growing At Year 5% 10% 15% 20% 1 $100 $100 $100 $100 5 $128 $161 $201 $249 10 $163 $259 $405 $619 15 $208 $418 $814 $1,541 25 $339 $1,083 $3,292 $9,540
Why is the difference between a few percentage points of return so massive after long periods of time? You are witnessing the miracle of compounding. When your investment gains (returns) begin to earn money, and then those returns start to earn money, your investment can mushroom very quickly. Extend the time period or raise the rate of return, and your results increase exponentially. For instance, if you start young, say at 15 years of age, note how quickly a single $100 investment grows, especially in the later years.
Growing At Age 5% 10% 15% 20% 15 $100 $100 $100 $100 20 $128 $161 $201 $249 25 $163 $259 $405 $619 30 $208 $418 $814 $1,541 40 $339 $1,083 $3,292 $9,540 50 $552 $2,810 $13,318 $59,067 60 $899 $7,298 $53,877 $365,726 65 $1,147 $11,739 $108,366 $910,044
Looking at it another way, let’s compare two teenagers and their lifetime savings habits. Bianca baby-sits a lot and spends most of her spare time reading. She saves $1,000 a year starting when she’s 15 and invests it in the stock market for 10 years earning 12% per year on average. After 10 years, she comes out of her shell, stops adding money to her nest egg, and spends every penny she earns club hopping and on trips to Cancun. But she keeps her nest egg in the market.
Compare her account to that of her friend Patrice, who squandered her early paychecks on youthful indiscretions. At age 40 Patrice gets a wake-up call when her parents retire on nothing but Social Security. She starts vigorously socking away $10,000 every year for the next 25 years. Guess who has more at age 65? That’s right, Bianca. (You figured it was a setup, didn’t you?) Her 10 years of saving $1,000 per year (just $10,000 total — the same amount Patrice put away in just one year) netted her $1.8 million by age 65. Patrice, on the other hand, scrimped for 25 years to invest a quarter million dollars out of her own pocket and ended up with just under $1.5 million. Neither will be going to the poorhouse, but you see our point: Bianca’s baby-sitting money grew for 50 years, twice as long as Patrice’s, and Bianca barely missed it.
(It’s almost not fair to mention this, but if Bianca put her money in a Roth IRA, that whole $1.8 million would be tax-free. On the other hand, Patrice couldn’t put her full $10,000 in a Roth, so Patrice will pay capital gains tax on a good deal of her gains.)The power of compounding is the single most important reason for you to start investing right now. Every day you are invested is a day that your money is working for you, helping to ensure a financially secure and stable future.
Common pitfalls to avoid
Before you race off through the rest of Investing Basics, there are some cautionary points to consider before you proceed. These are common mistakes many people make when considering what to do about investing.
1. Doing nothing. There is no guarantee that the market will go up the first day, month, or even year that you invest in it. But there is one guarantee: Doing nothing at all will not provide for a comfortable retirement.2. Starting late. Postponing your investing career is second only to not investing at all on the list of investment sins. You already know that the earlier you start the better off you are. (Take another look at the compound return example we gave above.) If you’re already past those formative twenties (you don’t look a day over 32 to us), we’ll reword this first pitfall to read: “Not starting now.”3. Investing before paying down credit card debt. If you have money in your savings account and you have revolving debt on your credit card, pay it off. Many credit cards have an annual interest rate of 15% or more. Let’s say you have $5,000 to invest, but you also have $5,000 debt on your credit cards with an average annual interest rate of 18%. It doesn’t take an astrophysicist to figure out that you’re going to have to get an 18% return after you pay taxes just to break even on that $5,000. Pay the debt off first, then think about investing.4. Investing for the short term. Only invest money for the short term that you’re actually going to need in the short term. Invest money in the stock market that you won’t need for at least three years, and preferably five years or longer. If you’ll need your cash next year for a down payment on a house or for the family Caribbean cruise, use one of the shorter term and safer havens for your cash, such as money market funds or CDs.5. Turning down free money. You’d never turn down a dollar if it was offered with no strings attached. That’s what you’re doing if your company offers a 401(k) or similar retirement savings plan with an employer match and you’re not participating. Take advantage of all tax-advantaged, employer-matched savings programs.6. Playing it safe. If you’re young, most of your investing dollars should be in the stock market. You have enough time to weather any dips in the market and to reap the rewards of long-term gains. Although you may want to transition into bonds later in life as you depend on your investments for income, stocks should make up a large portion of the portfolio of every investor.7. Playing it scary. Not every investment is for everyone. Even if you’re a daredevil, you shouldn’t pour all of your money into something that could end up going down the drain.8. Viewing collectibles or lottery tickets as investments. If old comic books, Barbie dolls, and abandoned exercise equipment could be used to fund retirements, do you think the stock market would exist? Probably not. Don’t make the mistake of thinking your jewelry, those Beanie Babies, or the lottery will provide for you in your latter years.9. Trading in and out of the market. We believe the best approach to investing is the long-term one. Pick your investments well and you’ll reap greater rewards over the long term than you had ever dreamed possible. Trade in and out of the market and you’ll be saddled with fees that chip away at your returns, and you’ll potentially miss out on gains that long-term investors enjoy with much less effort.
Congratulations mate! You’ve made it through the first part of Investing Basics. (Bet you didn’t even break a sweat.) You’ve witnessed the power of compounding and you understand how some common pitfalls can ruin even the healthiest investing plan.
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December 25th, 2009
posted in Investment News
Gold investments are the best way to consolidate your investments as they are well known for fixed market value that does not depreciates in a volatile way in comparison to stocks. Incase you are looking for investment opportunities; make sure you go for gold investment that helps you in getting the best value for money. Given the market value of gold and its stability over money investments, gold can offer huge financial returns and true vale for money. It is seen that gold has survived monetary collapses while sailing through swiftly in the bullion market. This makes gold stable in comparison to stocks and shares where the risk of losses is much high in comparison of profits.
However, if you want to go forth with gold investments, make sure you invest in gold coins as they offer instant liquidity solutions. Apart from liquidity solution, gold coin investment rules both the national and international markets. It is seen that gold bullion investment is the most lucrative and sound investment in bullion market as many investors try to incorporate gold stocks in their portfolios. However, if you are planning to dabble in stock of gold as investment, make sure you have a thorough knowledge about bullion trade and its market practice.
While making gold investment, try to gather as much information about bullion trade. This will definitely help you in making a sound investment. It is seen that investment in gold jewelry such as necklace, rings and other things is not as sound investment in comparison to gold coins and bricks. Gold bricks and coins are secure investments and help you in increasing your profitable bullion trade career. However, in order to get started with gold trade portfolio, you have to start collecting gold bars and coins. This will definitely give you an edge in trading policies. The benefit of trading in gold bullion trade is the fact that gold investment does not get effected by the falling paper currency. Therefore, if the trade market faces crunch and money value topples, your gold will remain virtually unaffected to the falling price by providing you an option of stable liquidity. Therefore, given the benefits of gold investment, gold coin sale can offer you a plum and lucrative trading practice that helps you in getting good money in exchange of gold. During increasing sensex, gold prices automatically increase and offer huge dividend on its sale.
So, given the amazing benefits of gold trade, if you are into bullion trade or deal in gold investment, you will definitely have an edge over other portfolio owners as bullion trade is more lucrative in comparison to other portfolios. In comparison to $ US, gold has show a strong position that makes it an important investment. Well, keeping all the above things in mind will definitely help you in making the best investment solution. Buy Gold as investments which are more profitable than real estate ventures as economical recession can take the toll of market price however, in gold investment; it remains untouched by any market condition.
December 23rd, 2009
posted in Gold Investment
Socially Responsible Investing for Idiots
Sí, Money! (http://simoney.us) By Michael Grodsky
If I have to be an idiot, at the least I’m a green idiot. I believe in clean air, corporate responsibility, community activism, licorice, pizza and Thai food. And healthy living, freedom, and of course freedom raisins.
Shiny happy raisins
I love trees, sky, and ah, the OXYGEN! But I’m worried about the dismal state of health care, education funding, the ozone hole, the Medicare donut hole, and your little dog too! Did you know the North Pole is melting? That really scares me. Plus I need to cut down on my Chunky Monkey intake.
In everything I do, in every move I make, it seems that I’m part of the worldwide web of production and consumption. So I pertly place my recyclables in the blue bin, our family uses reusable grocery bags, and I vote. What more can a light-switch thumping, gasoline-pumping 21st century fox do?
C’mon, baby, light my SRI fire…
It was only a couple of years ago a friend remarked to me that real estate was the only investment that made any sense, as if his seat on the Ferris Wheel of investments, propelled by an invincible source, would forever be going up, up, UP! Instead, what happened was “up, up and away.”
The first Ferris wheel, from 1893 World Columbian Exposition in Chicago
The desire for a sure thing is hard to resist. Albert Einstein, succumbing to pressure to support the idea of a static universe, in his 1917 paper added an adjustment number called the “cosmological constant” to his equation for general relativity. In 1931 he publicly renounced this static cosmology and endorsed the Big Bang expanding universe model, ditching the cosmological constant and returning to his original equation. He later called his bowing to peer pressure the greatest blunder of his entire life. You can read about the adventure in author Simon Singh’s “Big Bang – The Origin of the Universe.”
Many philanthropic foundations have long drawn a wall between their socially conscious mission statements that drive grant making, and the investment holdings of their endowment. There is a truism that investing for social benefit results in lower returns. But just as scientific peer consensus eventually embraced the Big Bang theory, so has the thinking of philanthropic foundations changed. The reasons are twofold: A recognition that corporate responsibility and societal concerns are valid parts of investment decisions, (1) and a growing number of academic studies have demonstrated that socially responsible investment (SRI) mutual funds perform competitively with non-SRI funds over time. (2)
For example, according to University of Maastricht and Erasmus University Rotterdam economists in their prize-winning paper, “we find little evidence of significant differences in risk-adjusted returns between ethical and conventional funds for the 1990-2001 period.” (3)
Foundation investment choices seem to be increasingly guided by effect upon society as a whole, not just financial gain, according to a recent Los Angeles Times article. (4) Fresh thinking in the nation’s largest foundations may be driving the impetus ever faster: The $8.5-billion William and Flora Hewlett Foundation (Menlo Park), the $6.1-billion John D. and Catherine T. MacArthur Foundation (Chicago), the $7.8-billion W.K. Kellogg Foundation (Battle Creek, Michigan) all have made recent changes to improve the social effect of their investments. (5)
SRI assets are also growing faster than assets as a whole: according to the non-profit Social Investment Forum’s 2005 biennial report, SRI assets rose more than 258 percent from $639 billion in 1995 to $2.29 trillion in 2005. Over those ten years, SRI assets grew four percent faster than the entire universe of managed assets in the United States. (6)
Some have already been on the SRI track: the nation’s second largest foundation, the Ford Foundation, along with others such as the F.B. Herron Foundation, the Jessie Smith Noyes Foundation and the Nathan Cumings Foundation, have for a long time aligned their charitable and investment practices.
What is Socially Responsible Investing? Socially Responsible Investing (SRI) is a broad-based approach to investing that now encompasses an estimated $2.3 trillion out of $24 trillion in the U.S. investment marketplace today. (7) The release of the United Nations Principles for Responsible Investment–subscribed to by some of the world’s largest institutional investors, asset managers, and related organizations representing over $9 trillion in assets as of mid- 2007–underscores the widespread acceptance of the principle that investors cannot, in the long run, achieve their goals by investing in corporations that externalize their costs onto society. (8)
How do I research SRI funds? A good place to start is the Social Investment Forum (http://www.socialinvest.org). Look at the resource list at the end of this article too.
How do I start investing? If you participate in an employer-sponsored retirement plan, there may be SRI funds already available to you. If you manage your own IRA or other plan, look into what’s available. But don’t just go adding a fund without considering the entire makeup of your portfolio.
The key to earning decent long-term returns and limiting overall risk is to have a proper asset allocation, meaning you don’t have all your eggs in one basket. For do-it-yourself-ers, check out the government’s website about asset allocation (http://tinyurl.com/2825hw), or purchase “All About Asset Allocation” by Richard A. Ferri ($13.57 at Amazon), a great introduction to the topic. Your personal financial advisor or company where you have your investment or retirement accounts can help.
How do I know which funds will produce the highest returns? You don’t, you can’t, and you won’t, so just forget about it because past performance doesn’t predict future results. The day-to-day ups and downs of the market receive the media attention, but the daily, quarterly, or even yearly returns are largely irrelevant in constructing an individual’s portfolio whose objectives are long-range. What you want to look for are funds that perform well over the long run within their particular sector, as compared to the appropriate benchmark indices. Various areas of the economy are always moving up and down and sideways, and so far no one has ever been able to know ahead of time what the pattern will be. Asset allocation, I’ll say again, may be the key to long-term success in building a financially secure future. Not panicking helps too!
What makes an SRI fund different? If a prospective company is a fit according to a fund’s stated objectives, research is performed to determine whether or not it’s a good idea to buy stock at the current offering price. It boils down to the question “Within the guidelines of the stated objectives of the fund, will this purchase help to achieve the highest possible return for the fund’s shareholders?”
The three core socially responsible investing strategies are screening, shareholder advocacy, and community investing. Screening means a fund will include or exclude companies based upon criteria such as alcohol, tobacco, animal testing, and human rights, among others. These screens can be positive (e.g., including companies that treat employees well) or negative (e.g., excluding companies who do business with disturbed musicians).
Keep in mind that, as with all mutual funds, SRI funds have no guarantees of future return.
In any case, you’d better take this lad’s offering of raisins!
If you use electricity, drive a car, and participate in many other activities of daily living, in a very true sense you are already investing in the companies that allow and encourage your consumption. In other words, you are part of the “market” whether or not you actually own stocks or mutual funds. Socially responsible investing can be a way to make your dollars work toward something in which you believe, and support those companies you believe have a vision in line with your own.
Resources and suggested reading
1. “The Mission in the Marketplace: How Responsible Investing Can Strengthen the Fiduciary Oversight of Foundation Endowments and Enhance Philanthropic Missions.” Social Investment Forum Foundation’s resource guide for foundations to manage risk and leverage their investment assets more fully with their core philanthropic purpose, while creating lasting value. http://tinyurl.com/35t49h 2. “10 best” list of companies. Corporate Responsibility Officer magazine rates the citizenship disclosures, policies and performance of large-cap, public companies in the following industries: Auto & Vehicles, Paper, Technology Hardware, Technology Software, Transport, and Travel & Lodging industries, Chemical, Energy, Financial, Media and Utilities industries. http://www.thecro.com/node/580 3. Social Science Research Network. http://www.ssrn.com/ 4. United Nations’ “The Principles for Responsible Investment.” An investor initiative in partnership with UNEP Finance Initiative and the UN Global Compact. http://www.unpri.org/ 5. The Social Investment Forum; national membership association dedicated to advancing the concept, practice, and growth of socially and environmentally responsible investing. http://www.socialinvest.org/ 6. Social Investment Forum’s 2005 biennial report. http://tinyurl.com/258794 7. Sristudies.org, a resource for quantitative aspects of socially responsible investing. Includes an annotated bibliography of studies of socially responsible investing. A project of the Moskowitz Research Program, which is affiliated with the Center for Responsible Business at the Haas School of Business, University of California, Berkeley. 8. Socially Responsible Mutual Fund Charts of Financial Performance. http://www.socialinvest.org/resources/mfpc/ 9. SocialFunds.com, an advertising-driven website with information on SRI mutual funds, community investments, corporate research, shareowner actions, and daily social investment news. 10. “Handbook on Responsible Investment Across Asset Classes.” For asset allocation junkies, individuals and institutional investors the Boston College Center for Corporate Citizenship created this work. http://tinyurl.com/2ffqbu
Footnotes
1. The Maturing of Socially Responsible Investment: A Review of the Developing Link with Corporate Social Responsibility by Russell Sparkes and Christopher J. Cowton. Journal of Business Ethics, Volume 52, Number 1 / June, 2004. 2. SriStudies.org 3. International Evidence on Ethical Mutual Fund Performance and Investment Style, paper by Rob Bauer, Kees Koedijk, Rogér Otten. Limburg Institute of Financial Economics, November 2002. (socialinvest.org/resources/research) 4. Foundations align investments with their charitable goals by Charles Piller, Los Angeles Times, December 29, 2007. Section C, p 1. 5. Ibid. 6. 2005 Report on Socially Responsible Investing Trends in the United States. Social Investment Forum. (www.socialinvest.org) 7. Socially Responsible Investing Facts. Social Investment Forum. www.socialinvest.org 8. PRI Report On Progress 2007. PRI (Principles for Responsible Investment), United Nations. (www.unpri.org)
Image credits
Sun-Maid/George Bush composite image • First Sun-Maid packaging to feature a likeness of Lorraine Collett as the “Sun-Maid Girl,” 1916. Designer unknown, incorporates painting by Fanny Scafford. Public domain in the United States. • Photograph of Bush speaking. Brazil, November 6, 2005. Agência Brasil, a public Brazilian news agency, produced photograph. Published under the Creative Commons License Attribution 2.5 Brazil. Fox/Morrison composite image • Foxes by Franz Marc, 1913. The Yorck Project: 10.000 Meisterwerke der Malerei. DVD-ROM, 2002. ISBN 3936122202. Distributed by DIRECTMEDIA Publishing GmbH. Public Domain. • Jim Morrison portrait, 2007, by Amadeu.taradell. Released by author into public domain. Ferris Wheel/Superman composite image • The first Ferris wheel from the 1893 World Columbian Exposition in Chicago. The New York Times photo archive. Public Domain. • Screenshot of 1941 cartoon Superman. Fleischer Studios. This work is in the public domain because it was published in the United States between 1923 and 1963 with a copyright notice, and its copyright was not renewed. Musician holding Valentine’s Day raisins composite image • Photo of musician Jeff Hawley, 2007. Manager, Marketing Content Pro Audio and Combo Division, Yamaha Corporation of America. Courtesy of Mr. Hawley. • Photo, August 3, 2005 by Mazbln. Halberstadt, Klosterkirche St. Burchardi, Ort des John-Cage-Projektes “As slow as possible.” Permission is granted to copy, distribute and/or modify this document under the terms of the GNU Free Documentation License, Version 1.2 or any later version published by the Free Software Foundation. • Original painting of Lorraine Collett by Fanny Scafford, 1915, later used on Sun-Maid raisin packaging. Public domain in the United States.
This column is meant to provide general information, and should not be construed as providing investment, legal, or tax advice. There is no guarantee as to the accuracy or completeness of the information in this article. There are no guarantees of future return for any fund, nor an endorsement of any investment product. Mutual funds are sold by prospectus only. For complete information on mutual funds including sales charges and expenses, call your financial professional for a prospectus. Please read the prospectus carefully before investing. Links are provided herein as a courtesy, and no guarantees are made as to the accuracy of the content on the referenced websites.
Sí, Money! – Vol. 2, No. 1 February 2008 – http://simoney.us
December 23rd, 2009
posted in Investment News
Dream Property Investment in Dubai
Property Abroad is one of the dreams of many people. Property Investment seems like a nice dream but something that could never come true. This is all wrong! The potential for Property Investment is now so good, as more and more markets become available to every buyer. If you are a first time buyer and seeking that little piece of Property Abroad or you want to build up your portfolio to include greater property investment, you can do it!
Once you have decided that you want to invest in Property Abroad then the next step is choosing the right place to suit your budget. This can seem like a daunting task, especially if you do not know which way to turn. The answer is simple, if you are looking for a great potential Property Investment market then look no further than Dubai.
If you are considering whether or not you should Invest in Dubai, then just think of how much money you will make in return. For a small amount of capital you can buy a Dubai Property and you will make great returns. The market for Dubai properties is constantly going up, which means that more and more people are desperate to live there. If you have a good piece of Dubai Property then you will take advantage and make money.
The Dubai Property market is where you can make money. Any professional Property Investment holder will tell you that if you find the right market then you will have the edge over others. Once you Invest in Dubai you will be able to tap into the need for executive accommodation and rent your property out. This means that instead of having a vacant apartment or building, you can make money from tenants, and when you want to move there either temporarily or permanently you can. You can make money from your Dubai Property throughout the year, helping to increase your overall Property Investment return.
Choosing the right property to suit your budget is key. You shouldn’t break the bank to get the right deal. There are potential property investment options for anybody. The lower end of the market has properties that can cost around £20,000. These suit small investors and those that want to buy a Dubai Property but cannot afford a high price.
The higher end of the market which deals with more professional Property Investment portfolios can cost around £1,000,000. This type of property can showcase all of the best assets of Dubai and cam make a real impact on your finances. The return that can be expected from these types of properties is amazing.
All Dubai Property is well maintained and structurally sound and can offer many different styles to suit. Whether you want to live in contemporary Dubai or live in a modern Dubai Properties complex, they have it all.
If you want to experience a better life and live comfortably then you should seriously consider the option to Invest in Dubai. The market is good and it is one of the best places in the world to live right now!
.
December 23rd, 2009
posted in Property Investment
Buying Gold is picking up. The question is will Gold take out the $1,000 price range this time? Gold investing has been quiet recently. There seems no interest in the news since Gold fell off earlier in the summer. Buying Gold has fallen off. Now since buying Gold has fallen off…will Gold take out $1,000 this time since no one expects it to?
Not to play on words there is a big difference between those who were buying gold this year…and those so called gold investing. With Gold investing, they bought gold because they thought or were scared( without any method) that gold would take out $1,000. Those that were buying gold relied on a method or system ( trend following). They purchased gold prior to the big run up in June…and exited…some with a profit and some with a small loss.
As we are trend following commodity trading advisors we know we do not know the future. We received a signal to purchase gold on 7.20.09 at a price of 945. Our initial risk was to 927. As you can see this …as in all of our trades was a low risk. The key in trend following is put on every trade. We can not choose and pick which trades we will take. We must be consistent. It will interesting if the gold market takes off. The effect on all commodities could be fascinating. We see the weakness currently in the US dollar as a back drop. Maybe inflation (which no one expects) might become present due to debt deflation. Time will tell if the Gold Market takes off. As a trend follower, we realize that any trade means nothing. We take lots of small risk trades, the majority do not work. This does not phase us. We know that eventually we will stumble into a nice profitable trade because we are making ourselves available.The key here is not to predict but trade a diverse basket in the commodity markets & forex markets and make small low risk bets when we receive our signals.
To see the actual chart come to
http://myinvestorsplace.com/2009/08/02/buying-gold-gold-investing/
Andrew Abrahamwww.myinvestorsplace.com
Futures trading involves risk. People can and do lose money
December 21st, 2009
posted in Gold Investment
Skyrocketing demand for safe-haven assets like gold have caused large-scale migrations away from riskier assets like stocks by investors looking to protect their hard-earned wealth with the best gold investment possible. This comes as no surprise, especially since the metal has proven its ability to thrive time and time during troubling economic scenarios. Gold’s value has increased more than 400% in the past decade, thus investors continue flocking to this historically powerful safe-haven tool.
Finding the best gold investment that suits your investing goals perfectly should be your main goal when purchasing bars and coins, and the first step that you want to take is fully analyzing your portfolio in order to fully understand what products could be best for you. If you seek true security with your gold investment, don’t settle for anything less than physical possession bars and coins for inside or outside retirement accounts. Gold stocks and Exchange Traded Funds hold several weaknesses that make them just as risky as traditional stocks, bonds and real estate.
The physical gold investment market can be separated into two distinct categories; modern bullion products and certified rare coins. Modern bullion products like the American Eagle coins and Johnson Matthey bars are useful for short-term profit because they hold very low premiums above the spot price of gold, usually around 5%-7%. Certified rare coins like the $20 Saint Gaudens and $20 Lady Liberties are useful for long-term wealth preservation because their numismatic attributes helps them maintain value over the years while at the same time increasing in value when the spot price increases.
Research is key to finding the best gold investment, and that’s why many wise investors turn to large nationwide precious metal dealers like the Certified Gold Exchange that assists investors with every aspect of their diversification. If you seek success with precious metals, request your free “Insider’s Guide To Gold Investing” by visiting https://www.certifiedgoldexchange.com/goldrequest/article/Best-Gold-Investment
December 20th, 2009
posted in Gold Investment
Property investment has always been one of the most common methods of investing capital. Many know that property investment can be a lucrative business option and hence many investors consider it an integral part of their diversified portfolio.
Investing capital in a specific industry like property is a long-term way for individuals or families to obtain financial security for their present as well as future. As property values are rising in many countries, investors can achieve good capital growth.
Here are important points to consider about property investment:
1) The bottom line of property investment is to find an affordable property that can prove to be highly lucrative for the future. Anyone can invest in property and use any number of the many books and guides packed with helpful information that are available on the internet and at local bookstores and libraries.
2) Sometimes this huge amount of information can seem to be complicated and confusing. The best advice is to start from a primary level and then learn some tricks of the trade. If you are a beginner, you must look for a profitable property investment…so seek articles and tips on this.
3) Though the whole scenario of investments is always changing, property investment is still a viable means to enhance your financial portfolio. As time moves on, for example with newer media options of television and internet, new trends in property investment are appearing.
4) In the last decade, a common way to buy and sell property was to buy a house and / or to fix the existing problems. Prepare your property for resale and then sell the house quickly.
5) Residential property investment is the investment that can carry low risk and is not like investing in commercial property where investors have to worry about the conditions of businesses. Property investment loans are not as difficult to get as other types of loans and investing in residential properties can give investors a substantial financial boost.
Investors must consider the surrounding environment. For example, if you are buying residential properties then check whether there are sufficient numbers of schools, hospitals, main roads etc. to support our day-to-day existence.
Also check out the history of capital growth rate in the area in last at least 15 years. Make sure that property investment is worth the capital benefit. You must also consider the population growth rate of the locality.
Investors can also get property investment loans and attain about 106% of the purchase price. However, to qualify for such loans, your financial conditions must be able to sustain your current liabilities as well as the investment home loans. Lenders usually assess your assets, income and credit profile before financing your investments.
Investing in property extensive financial planning, but it also gives you some great tax benefits. Even though the market shifts all the time in the property sector, buying and selling property is always a good industry to be involved in.
If you are planning to invest in property, you need to take advice from experts or you can conduct research on the internet, attend seminars, interact with social groups and then read as much as possible regarding this matter to clear up all your investment doubts. The more you know about market, the better you will become at finding good property investments.
December 20th, 2009
posted in Property Investment
Intended Audience
Individuals looking to purchase a home for personal use or as an investment. As well, looking into conventional wisdom’s statement that buying a house is one of the best investments someone can make.
Summary Points to Take Away
Analysis
Conventional wisdom states that buying a house is one of the smartest and best investments an individual can make. This article is geared towards challenging this conclusion to see whether this statement rears any truth to it.
Why a House is a Good Investment?
Forced Savings Plan
Most individuals claim that the purchase of their personal home was the best investment they’ve ever made, which is true in most cases because it is the only investment they’ve ever made. The general public struggles with saving for retirement; thus, purchasing a house assists in that problem as it forces individuals to continuously pay down the mortgage (or lose the house in a foreclosure to the bank); therefore, allows the storing of equity for the owners. This built up equity (i.e. market value of home minus remaining mortgage) can be borrowed against during their retirement years or they can downgrad into a less expensive house in order to provide some retirement funds to the owner. If individuals take a disciplined approach to saving, then the benefit of being forced to save in order to pay for a house diminishes
Leverage
Typical real estate purchase require only a 5% deposit, while the remaining amount can be borrowed through bank debt. Few alternative investments outside of real estate can the acquirer obtain such significant leverage, which can enhance investment returns.
Example, suppose that you purchased a home for $200k, for which you made a 5% deposit down ($10k). During the next few years the house appreciates in value and you sell it for $220k (10% higher than the level you purchased it). Though the return on the house is only 10%, the return to the investor based on invested funds sunk into the home ($10k) is 200% ($20k earned over $10k investment) – that is the power of leverage. On the negative side, more debt means higher fixed monthly mortgage payments; thus, higher risk of being able to make the monthly mortgage payments. As long as cash flow is not a concern and the mortgage payments can be met – investments should be leveraged to maximize returns to the investor. Could you imagine walking into a bank and asking for $100k to invest in equities while only putting 5% down – likely to never happen, this is a major benefit of real estate ownership.
Inflation Resistant
Real estate holds its value during inflationary periods; thus, acts as a hedge against the investors other assets that aren’t protective against inflation (ex. Currency). The asset will continue to hold its buying power (store of value), which is difficult to get outside of investing in precious metals. The reason real estate holds its value is there is the same number of houses that the increased monetary supply of dollars are chasing; thus, it’ll take more dollars to purchase the houses as the supply of houses stays stagnate while the demand rises (due to the increase in the number of dollars in everyone’s hands). This can become critical given the current economic times and numerous expansions of monetary supply across many nations, which will have the aftermath affect of higher inflation.
Capital Gain is Tax FreeIn Canada, every home owner is provided with a capital gain exemption on amounts earned in excess of cost for their principal residence. Only one piece of real estate can be claimed as the principal residence per individual. For example, if you owned a home and a cottage, only one of those houses upon selling could take advantage of the principal residence exemption. No other asset class has such advantageous tax reduction characteristics. Unfortunately this is a onetime event; thus, those holding numerous pieces of real estate can only apply it to one property.
Allows for Control over the Asset
Real estate is typically an investment an individual has control over (assuming you’re the majority owner – which is typically the case) by the means of the owner has the ability to increase the value of the asset, which may not be the case in most other investment opportunities. When purchasing real estate, owners can make capital improvements to the home (ex. Finished basement, new porch, etc.), which will increase the value of the property (capital appreciation) as compared to purchasing stocks or mutual funds as assets where the owner can’t take action to increase the value of those assets (unless they’re a significant owner, greater than 20% – which is typically unlikely). The ability to control an asset adds value to the owner through what is known as a control premium, as a real estate asset may be more valuable in the hands of some individuals over others.
Why a House is a Bad Investment
Lack of Diversification
Average individual thinks the stock market is very risky while investing in real estate is more of a certainty. Purchasing equities allows the owner to conveniently hedge their risk amongst various companies in numerous industries, countries, etc. The purchase of real estate doesn’t provide the ability to diversify risk away as easily unless an investor plans on owning numerous pieces of different types of properties (ex. residential, commercial, resorts, etc) across various markets (North America, Europe, etc) – which is probably very unlikely for the average investor. Purchasing real estate prevents the diversification of risk because it’s dependent on the economic, migration, and regulation trends of the local area.
For example, assume you purchased a home in Oshawa, Ontario – which is a town extremely reliant on the large manufacturing facility of General Motors (GM). Should GM cut back on production or move their facility housing prices would fall sharply as it is the biggest employer in the area; thus, demand from individuals will decline as unemployment rises and real incomes fall. With a decline in demand and supply staying stagnate (as you typically can’t “un-build” a house once it’s constructed) the price will have to shift towards in order to align demand with supply.
Real estate doesn’t allow the investor to diversify away the specific risks in the local area as compared to purchasing equities, which allows the investor to spread risk amongst investments that perform differently during different points along the business cycle. Most individuals when purchasing real estate have all their eggs in one basket.
Maintenance Costs
Transaction and maintenance costs are significantly higher for real estate investments than stocks, mutual funds, etc. When purchasing stocks costs are typically broker commissions ($20 per transaction if using an online discount broker), while when purchasing a home it is typically 2% commission on the transaction value, significantly higher than purchasing equities.
Once you purchase shares, no further cash is required from the investor unlike real estate, which requires constant annual expenditures that continue to increase the investors cash committed towards the property, such as property taxes, insurance, utilities, maintenance and repairs of the asset, etc. These are costs that real estate investors or home purchasers don’t factor into their expected return, but play a significant role as the payment of property taxes (etc.) doesn’t contribute to the value of the property for eventual sale in the hopes of capital appreciation.
Historical Lower Returns Compared to Equities
During any 20 year period throughout history, no other asset class has outperformed equities, which includes real estate. This is from the perspective of asset vs. asset without consideration of leverage and how that may enhance returns (as discussed earlier). While it is true that over the long run real estate prices go up in value, this is typically due to inflation incurred. Recent spikes in housing prices seen in the past 10 to 15 years has been due to changing demographics, specifically the baby boomer generation (who makes up largest segment of the population in North America) go through life stages at the same time (same goes for starting a family and purchasing a home and real estate investment property). The result was a large influx in demand without a corresponding increase in supply as construction requires lead time; thus, leading to rising real estate prices.
Will this high demand continue? That’s where the argument lies. Likely there will be softness felt in overall real estate demand as baby boomers already have their homes and they’re likely to either stay put, move to retirement homes or downgrade into a smaller place in order to obtain some retirement income. Immigration will continue into North America that will prop up demand, but likely not the extent to fulfill the whole in demand left by the baby boomer generation; therefore, the future appreciation in real estate properties is likely to flatten out.
Can’t Take Advantage of Available Opportunities
The purchase of a home or real estate property requires the individual to tie up a significant portion of their net worth into the property (in a lot of cases, all of it). Having all your net worth in real estate is a risky strategy as you’ll be severely impacted by movements in real estate prices as compared to having your cash tied up into several asset classes; thus, less vulnerable to swings in any one asset class. Similar to the discussion had under the “diversification” section of this article.
With the majority of an investors net worth tied up in a real estate property, there isn’t available cash to take advantage of other opportunities that come along; thus, significant opportunity costs are involved in venturing into real estate. This should be considered before purchasing an expensive personal home or making a real estate investment.
Limited Scope
Real estate is a local good, unlike gold for example – which can be bought and sold throughout the year for the same market price. An individual looking to buy a personal home or make a real estate investment doesn’t have access to all available properties as there are physical limitations to contend with. It comes down to wanting to live where you grew up or currently work or not wanting to buy a rental property far from your home in order to reduce logistical issues. For example, if you live in Toronto, Ontario and are looking to make an investment in a rental property, you’re unlikely to consider properties in Paris, France though the opportunities may be better than those surrounding Toronto due to language and logistic issues. Equities (and etc.) are globally traded and available; thus, users can take advantage of opportunities around the world; thus, their scope is not limited to the local area of their current surroundings like real estate is.
Additional Points to consider if you’re purchasing a Home for Personal Use.
Doesn’t Provide Any Cash Flow
An asset typically provides you with cash flow, i.e. puts cash in your pocket. When purchasing a home, cash only flows out (property taxes, repairs, etc.); some would argue that if it appreciates in value then it is an asset. In this instance it is only an asset when converted into cash and if that is the case, where will you live? Likely end up buying a new house, which has also gone up in value similar to your house. This makes it difficult to realize the value of your personal home appreciation, which acts more like a liability than an asset since it takes cash out of your pocket instead of putting some in there.
Tax Deductibility of Interest
Interest expense paid due to bank loans taken to finance investment properties is deductable against income because the investor is pursuing income and tax legislation allows deduction of any expenses incurred in the pursuit of income. This is not the case for a mortgage taken out to purchase a house for personal use as the individual is not in the pursuit of income; thus, interest expense is paid with after tax dollars, with no tax shelter provided. If those funds had been borrowed to invest in equities or mutual funds, the interest would be deductable because again that would count towards the theme of pursuing income.
Can Get Personal Joy Out of It
Unlike equities and other alternative investments, the investor can’t personally use or get joy out of it as compared to purchasing a home, which the individual can live in and enjoy during the investment process. An investor who purchases shares in General Motors (GM) can’t exactly borrow and test drive cars whenever they please simply because they’re a part owner. This is a qualitative benefit that is difficult to quantify, but should be considered.
Where to go from here?
The main reason to purchase a house is to have somewhere to live and enjoy their life, don’t think of it as an investment. Buying a home isn’t a bad decision; it is the investor’s perception that may be tainted because it is important to realize that there are many arguments against a home as an investment to be considered. Don’t buy real estate property with the mindset that an individual can’t lose and that there is no better investment opportunity than to purchase a home, etc. Beware of conventional wisdom that states there is no better investment than purchasing a house.
THANKS,
SIMON GIANNAKIS
December 19th, 2009
posted in Investment News
Property investment has become a boosting choice for people looking for greater freedom in how they spend their interim time or how they invest for the future. If you planning to purchase Investment Property there are many choices in the internet which give you access to the biggest selection. Auction property investments, Off Plan Property Investments, Distress Sale Properties, everything the property investor requires under one online property marketplace.Recently, the media has reported that most areas in UK have listed rates shrinks, with property investments in Greater London taking the sharpest drop of all. These estimations may be sourcing some people in the UK to question if it is still in fact a perfect time property investments.Stories of a property investment crash in the UK have been constantly in the news for quite some time now. But many property experts are of the certainty that the property market will remain solid. The reason behind this is that the deliver of property is inadequate to meet demands not to mention the fact the property is still affordable.When the prices falls or when there is a decline in asking price, there is always a group of ready investors that are inclined to pick up bargains. These comprise of people such as first time investors, family movers, or property investors seeking property investment deals. The justification why there is a ready supply of investors is because there is a essentials under supply of property, as the current number of completed establishments is running below demand.The intensifying demand for a deteriorating supply of property investment will produce prices to remain firm. Even though unsold properties have been reported to rise, the unsold stock levels are expected to remain below the long-term trend. Immanent migration has increases drastically due to the attraction of the UK as an excellent place to work and live in.Additionally, there are also two suitable circles that make the decision in property investment is a sound one. Evidently, no issue which way the UK economy turns, property investment market is still expected to stand out, most especially over the long term. First, when the economies of the world enter another recession or denigration, then interest rates could come down, further decreasing property investors’ expenses, while retentive the rental revenue. Second, if the capital venture of property investment takes a fall, then people will terminate purchasing investment properties, and rent alternatively. The growth in rental demand wills then surprise in property investment income.
December 17th, 2009
posted in Property Investment
Finding the best gold investment advice from knowledgeable experts is an excellent way to prepare a successful diversification with gold, and there are a few important pieces of advice that you could use to your advantage in order to maximize your profit and wealth preservation potential. First things first, before actually beginning a gold investment, it’s important that you thoroughly analyze your investing goals in order to determine whether a precious metal diversification could be right for you. If you seek a powerful safe-haven asset for either short-term profit or long-term wealth preservation, then your next steps are to explore the market by analyzing the spot price and its daily fluctuation, the different types of bars and coins as well as the many dealers that are available to supply these products.
Exploring the market is some of the best gold investment advice you can obtain because many investors simply jump into a diversification without conducting solid research This negligence commonly results in unsuccessful investments. The gold market revolves around supply and demand for the metal, and the most important variable to keep your eyes on is the daily spot price. This spot price is basically the price of one-ounce of gold on commodities exchanges worldwide before additional premiums are factored in. Note that you cannot purchase bars or coins at spot price, this is simply a variable that actual product prices are based on. You can track this spot price on reputable precious metal websites.
As far as the actual bars and coins are concerned, there are many options available to you. Modern-day bullion bars like the Johnson Matthey products and bullion coins like the American Eagles are commonly purchased by short-term profit seekers because of their small premiums. Pre-1933 certified rare coins like the $20 Lady Liberties and $20 Saint Gaudens are commonly purchased by long-term wealth preservation seekers because of their preservative numismatic value.
When seeking the best gold investment advice, you want to ensure that you are working directly with a reputable precious metal firm that is knowledgeable in all different areas of investing. Companies like the Certified Gold Exchange hold a flawless track record of guiding investors to excellence since 1992, thus making them industry leaders in this competitive market. If you seek success with your investment, request your free “Insider’s Guide To Gold Investing” by visiting https://www.certifiedgoldexchange.com/goldrequest/article/Gold-Investment-Advice
December 17th, 2009
posted in Gold Investment
Property investment has always been one of the most common methods of investing capital & can be a lucrative business option and hence many investors consider it an integral part of their diversified portfolio. It is a long term investment for individuals or families to obtain financial security for their present as well as future. However, you should consider some important points while doing property investment. If you are a beginner, you must look for a profitable property investment. The bottom line of property investment is to find an affordable property that can prove to be highly lucrative for the future. As time moves on, for example with newer media options of television and internet, new trends in property investment are appearing. So, always keep yourself informed about upcoming trends in property market with the help of these informative mediums. Prepare your property for resale and then sell the house quickly.
Residential property investment is the investment that can carry low risk and is not like investing in commercial property where investors have to worry about the conditions of businesses. Property investment loans are not as difficult to get as other types of loans and investing in residential properties can give investors a substantial financial boost. Also check out the history of capital growth rate in the area in last at least 15 years. Make sure that property investment is worth the capital benefit. You must also consider the population growth rate of the locality. If you are planning to invest in property, you need to take advice from experts or you can conduct research on the internet, attend seminars, interact with social groups and then read as much as possible regarding this matter to clear up all your investment doubts. Though the whole scenario of investments is always changing, property investment is still a viable means to enhance your financial portfolio. Because, the more you know about market, the better you will become at finding good property investments.
Wealth Management is classified as an advanced type of financial planning that provides High net worth individuals and families with private banking, estate planning, asset management, legal resources, and investment management, with the goal of sustaining and growing long-term wealth. The main objectives of wealth management are providing families dealing with services in retail banking, legal resources, investment management, and taxation advice goals to sustain and grow long-term wealth. Wealth management often includes further diversifying investments by adding real estate, precious metals, business and other untraditional investments.
Products dealt with in wealth management include stock trading and stocks, investments linked with equity, derivatives and products relating to structured investment, foreign exchange, unit trusts and mutual funds, investments and management of property, etc. Alternative investments with respect to wealth management include art, wine, precious metals, etc. Due to its prime importance, it is advisable to take the help of wealth management company while running a big enterprise. Because a wealth management company helps in growing long-term wealth for achieving long-term profit as It analyzes your wealth management plans including investments, insurance plans etc, calculates the related risks and then it proposes a wealth plan. It may provide many services like portfolio management, investment management, portfolio rebalancing, trust and estate management, private management, tax advice and financing solutions etc.
A wealth management company sometimes also implements some useful financial tools like stocks and stock trading, structure savings products, structured investment products and derivatives, equity linked investments, property management and investment solutions, mutual funds and alternate investment options. These tools provide assistance in making your money grow and provide you long-term investment benefits. Thus, proper wealth management with the help of financial planning can make you gain very fruitful returns on your investments which will have increasing volume each time.
December 17th, 2009
posted in Investment News
As it appears gold has always been greatly appreciated by investors at large. Most of them believe in the same, namely, the history likes to repeat. Analysing the prices of gold it is not difficult to figure that during inflation rise, political instability or military conflicts gold tends to rise in value. A good example of this can be found in the case of war in Iraq. In 2003 when the situation was getting worse and very uncertain gold had risen in value up to 389 USD per ounce beating its best 6 year price at the same time. Moreover, in february 2009 prices broke through seven-month high, reaching 973.20 USD an ounce. For this reason is gold known as so-called safe heaven for investors being on of the most secure investment. In the view of yesterday’s information about North Korea missile launch trial it might be a good time to consider asset allocation in gold.
What has to be observed is that loads of investment opportunities offered by gold have one common characteristic, namely, all of them must be treated as long-term investments if we truly want to think about reasonable profits.
A good idea maybe to buy some gold bullions. Gold bullions are definitely one of the most common form of gold investments when it comes to private investors due to the fact that they are considerably cheap to acquire comparing to other forms of more advanced investments. What you should be aware of however is the fact that you will usually have to pay extra 4% up to 8% when buying in respectively smaller and larger quantitites. Naturally, potential profit upon sale will have to be reduced by the same percentage. From the most common big bullions currently is the most popular is London Good Delivery. Thus, other bars must comply with the standards and be at least 99.5% pure, weight around 11.3kg, have the standard shape, and come from reputable source.
Gold coins are not less attractive if bought with numismatic expert advice. Here the dominating form of asset allocation is Krugerrand with the best known South African design. Widely accessible and by far the cheapest to acquire Krugerrands are perfect for small investors wishing to put small amount into gold. Another advantage is simplicity in calculating one Krugerrand equates to one ounce of gold and therefore no weighting etc. is required to easily estimate the value of coin.
Alternatively, apart from varietites of different mutual funds, stocks etc. one may want to consider Avrae Global Coin Fund. Here the value cannot be that easily estimated as there are some external factors such as numismatic value, condition and scarcity. The coins can usually be bought from lists, auctions or through a number of independent collectors forming literally coin collecting network. Noteworthy, this form of investment appears to be by far more complicated as is not entirely dependent upon market gold prices fluctuations. Rare coin hunting is a very technical process requiring not only theoretical knowledge but also years of experience.
December 16th, 2009
posted in Gold Investment
Whichever way you plan to invest, this section will give you some tips and techniques to get you started
Understand why you are investing.
One of the keys to successful investing is identifying your investment goals, and the time frame over which you will invest. What do you want to do with your money?
Your goals and time frame
When investing money, many people have a specific goal in mind. If this is the case for you, you need to decide what time frame is attached to that goal — short term, medium term or long term?
Rather than having a particular investment goal, some people may just want to invest a sum of money, for example, an inheritance. If you are in this situation, you need to decide what you want from that money. Do you want to use the money in the next year or two? (in which case you are a short-term investor).
Or do you want a regular income? Or do you want it to achieve capital growth over the long term?
A short-term investor would be more likely to choose a more conservative investment like cash, to ensure that their capital is available in the next one to three years when they need to access it. A long-term investor would be more willing to invest in growth assets such as shares, as they do not need to access their capital for at least five years, so are usually less concerned about short-term ups and downs. They recognise that the potential returns are higher in growth investments, and if they are held over the long term the risk associated with short-term volatility is reduced.
Don’t forget that superannuation is one of the most tax-effective ways to invest for the long term. If you would like more information on superannuation, contact your financial adviser.
In considering which type of investment is most suitable for your goals, a professional financial adviser can help you with this decision after analysing your investment objectives, particular needs and financial situation.
2. Become an investor instead of a saver.
Many people invest but only some become wealthy. Why? The mistake many people make when investing is that they treat their investment as saving. So what is the difference between saving and investing? Saving is what you do to build up funds for something, like a holiday, and when you have the amount saved, you withdraw your capital from your investment and spend it.
Investing is different. People who want to build wealth invest their money for the long term in growth assets, such as shares and property. Their strategy is to spend the income that the investment produces, but leave the capital invested. They don’t withdraw the capital, so it stays there to grow, which in turn allows more income to be produced.
If you do this it will take you a while longer initially to get to your investment goal, but in the long run you will find that the extra wait has been worth it. As the years go by, you may have an increasing additional income stream from your investments and your standard of living can rise accordingly.
So what’s the secret to becoming wealthier? It’s easy! Start investing, and stay invested.
Other Tips to Remember…
Start early and take advantage of compound interest.
There is always a ‘good’ reason for not investing, but there is actually an even better reason to start investing right away. In fact, starting sooner rather than later is one of the best investment decisions you can make. The reason? So you can take advantage of compand interest. The problem is that compound interest works against those who hesitate. Most of us studied compound interest at school, so we know how it works. But it’s not until you start looking at practical examples that you realise how powerful it can be.
Use market movement to your advantage.
Dollar cost averaging – One way to ride out the market’s ups and downs is a technique called dollar cost averaging, typically used in managed funds. With dollar cost averaging, you don’t have to focus on where share prices or interest rates are headed. You simply invest a set amount of money on a regular basis. Dollar cost averaging is an investment technique that can help turn the odds in your favour. The idea is that you buy less units when the market is up, and more units when it is down — automatically.
Don’t try to time the market.
One of the excuses many use for not investing is that it is not the right time to invest. These people are likely to be under the misconception that they have the magical powers to be able to predict the future. They are under the illusion that the path to riches is a matter of getting on the right horse at the right time.
However, as investors begin to learn the vagaries of markets, they begin to realise the insurmountable difficulty in picking market movements. Trying to pick the magnitude and direction of market movements has cost even the most experienced investor dearly. Don’t chase returns.
Investing in the fund that had the best performance last year may be a big mistake! Most fund managers will offer you a choice of many different types of managed funds, from shares and property to fixed interest and cash, to mixtures of all of them. There are also usually a range of different share funds investing in different parts of the world. Given such a wide choice of investments, and the ability to switch your investments between them for little or no fees, some people make the mistake of chasing returns.
Chasing returns means that you are moving your investments across to the fund that had the best performance last year. Why can this be a mistake?
December 16th, 2009
posted in Investment News
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December 13th, 2009
posted in Investment News
Are you interested to become member of a property investment club? Do you want to find out more about investment property opportunities? If your answer to either of these two questions is affirmative, then you should definitely keep on reading. You will be informed about properties sold below market value and how you can purchase them with limited resources. Let’s see what this is all about.The first thing that you have to do is go online and find a reputable property investment club. Once you have found the right club, you can became a member and inquire additional information about investment property. Choosing a professional source means that you will be given some genuinely interesting opportunities to invest and it’s up to you to decide whether they are worth it or not. In time, your portfolio will grow, encompassing a lot of BMV (below market value) properties. And did you know that all it takes to sign is to give your name and email?The real estate market is a very tricky place to do business. Prices are constantly changing and sometimes it can be hard to succeed investing in this sector. By joining a property investment club, you are given unique opportunities. We are talking about discounted properties and simply amazing deals that are just too hard to say no to. If you are interested in investment property, then you will have to find an experienced company to partner with. This is the key to success.Experience matters extremely when it comes to things like investment property. The specialists working at the property investment club do extensive research in order to find the best properties on the market. They always look for investments that will guarantee important returns, mortgaged homes or those that require no advance in order to be purchases. For them, it’s vital to show that the real estate market is still a lively place and one where business can still be done. They come up with properties that have financing options, ensuring that the client is satisfied at all times.The opportunity to purchase a property below market value cannot be passed by someone who is genuinely interested in investment property. They recognize a great deal and know how to take advantage of it. Given the economic crisis, there are many properties that have been repossessed by lending institutions. As a member of a property investment club, you will have full access to listings of discounted properties. Some have been repossessed as the owner was unable to meet payments; others were mortgages and many simply sold for the owner needed the money.The moment you have signed up to become a member of the property investment club, expect to receive emails with the latest properties introduced on the market. You can check out all of these investment offers and decide if investment property is the thing for you or not.
December 10th, 2009
posted in Property Investment
Gold investing has become one of the most popular safe-haven diversification methods in the past decade because the downfall of the United States economy has sparked nationwide interest for history’s most cherished precious metal. Masses of investors are turning to gold investing because the metal has outperformed most other traditional investments in the past few years while at the same time keeping portfolios safe from large losses that have become common with riskier assets like stocks, bonds and real estate. Below I have listed and explained 3 tips for successful gold investing that could help you maximize your profit and wealth preservation with bars and coins:
1. Analyze Your Portfolio = It’s surprising how many investors make investments without first analyzing their portfolio in order to determine investing goals and needs. In order to succeed with gold investing, you want to ensure that you are purchasing the right product for the right reasons. Are you a short-term profit seeker? If so, bullion bars and coins may be right for you. Are you a long-term wealth preservation seeker? If so, certified rare coins may be right for you.
2. Explore The Market = Exploring the market is important because you want to be as informed as possible with various aspects of your diversification. Learning how to track the daily spot price, researching bars and coins as well as finding the best dealers is critical for investment success with gold.
3. Invest Appropriately = Once you have done your due diligence, it is then time to invest appropriately. Investing in gold is a very exclusive diversification because it could hedge your portfolio from significant losses that have been common with riskier assets like stocks, bonds and real estate. Leading gold investment advisors recommend around a 25% net worth diversification because this ¼ hedge could protect the other ¾ of your wealth.
If you would like to learn more about gold investments with North America’s only long-standing precious metal firm that holds an A+ Better Business Bureau rating, contact the Certified Gold Exchange and receive your free “Insider’s Guide To Gold Investing” by visiting https://www.certifiedgoldexchange.com/goldrequest/article/Successful-Gold-Investing
December 10th, 2009
posted in Gold Investment
Whether you are an experienced property investor or are searching to get a first stair on the property investment ladder, a unique approach to help you develop or start your investment property portfolio. Online property investment guides you to buy, to let and provides its clients a trouble free approach to property investment by offering an innovative Buy Already Let property acquisition service. Property investment can provide a colossal sense of contentment that you simply cannot find with other forms of investment. Property investment is now becoming a far more mainstream investment vehicle, straightforward to investors with the knowledge and foresight to spot lucrative investments before the competition can. Yet whilst they stay on relatively open and accessible, the road to successful property investment and land investment is scattered with those who have made a multitude of investment and other mistakes and paid the price.So online firms are there to help you recognize your dreams of property investment, find the right investment opportunities and keep away the drawbacks along the way. By maintaining up-to-date with the latest news and articles featured on the many websites, you will gain the skills compulsory to make a benefit from your investment. If you have priority made property investment or know someone that has, you will know how hectic and nerve-wracking the process can be. Estimating the Cost measure of any decision you make is perilous- to assure you make the best choices to maximize your profits, long term earnings.While most investors have got engaged in property investing because they know the chances to make money via leverage and capital growth or high yields, I still see and hear of many who do not fully understand opportunity cost. “Opportunity cost is a term used in economics, to mean the cost of something in terms of an opportunity predetermined (and the profits that could be received from that opportunity), or the most valuable foregone alternative. So in property investing issues, if an investor plans to invest in a property in the opportunity cost would be what he could have made by investing in Spain, France or UK. Analogously if an investor chooses to keep equity of 50k in a property, the opportunity cost is what he/she could replaceable have invested this money in and the resultant value.Now again this will depend on your particular strategy – and many people are not too affected about opportunity cost, they are just keen to buy 1-2 properties that can hold onto for 15-25 years to use as a pension. All discriminating property investors understand the importance of taking advantage of the most cost-effective property investment opportunities as soon as they arise, before they become common knowledge.
December 9th, 2009
posted in Property Investment
2007 marked the beginning of what has been commonly referred to as “the worst financial crisis since the Great Depression,” and this weakened economy has caused mayhem with mainstream investments like stocks, bonds and real estate. Newspapers, magazines and articles from various sectors have reported trillions of dollars lost with paperbacked assets as a result of major economic contractions. Between 2001 and 2008, the majority of mainstream investing markets spiraled downward, and during this same period the gold spot price increased more than 300%. Masses of wise American investors have begun looking for the ultimate safe-haven tool that could help them protect wealth and even profit, and what better protection than a gold investment?
For decades, investors who have owned a gold investment have been able to store their wealth while profiting from upward fluctuation with history’s most cherished precious metal. The reason that investors turn to a gold investment during troubling economic times is because the metal is considered to be an asset that holds true value, as opposed to paperbacked assets like stocks that are dependent on company strength as well as the overall strength of the United States Dollar. With inflation and deflation continuously threatening paperbacked assets and the United States Dollar, doesn’t it make sense to own gold as a backup plan in the event that the economy collapses? Just like with backup generators in the offices of major corporations, a gold investment backup could help you keep your lights on in the event that the economy gets much darker.
Skyrocketing gold investment demand has driven gold’s spot price to record highs, and increasing demand continues pushing the metal’s value even higher. Many market analysts, financial planners and institutional investors believe that gold may continue climbing similar to movement that was seen in the late 1970’s when the spot price increased more than 800% in two years. If this were to happen, wouldn’t you like to know that your hard-earned wealth could be safe from major losses, while at the same time profiting if spot prices reach projected levels?
When beginning a gold investment, it’s very important that you fully understand how the market works in order to maximize profit and wealth preservation potential. A proven method for diversification success is working with experts that can guide you in the right direction. Explore your options with a gold investment today by researching the award-winning online tutorial at www.Gold-Investment.info. When you are ready, contact one of our experts at www.CertifiedGoldExchange.com and let us guide you on the road to peace of mind with the security of gold in your hands.
December 7th, 2009
posted in Gold Investment
A property investment advice can provide you a complete help for implementing money in certain sectors of the economy, be it for domestic or international investors. Property investment advice for a several country will based on numerous parameters of the economy ranging from the banks and the banking services of the country, policies under taken by the home government with respect to foreign and domestic investors and most importantly, the situation of secondary markets in the home country.
Different sorts of real estate investments often produce similar returns that is capital growth. But while most potential property investors have undertaken their own home financing and can transfer this experience to similar housing. It is unwise to trust that other property investments have similar features. If you are venturing outside housing for the first time for investment objectives, make sure that you should know the factors of the new market and obtain expert advice if needed.
Similarly be attentive about the property investment seminars – especially those for purchases off a plan. Conventionally speaking, advisors who offer full property investment advice on the full range of your investment requirements. When the price of purchasing an investment property is more than the revenues it earns, you can negatively gear and receive tax benefits. Take property investment advices from your financial advisor to watch how this can work for you. It’s popular with investors as you can predict the non capital cost of buying a property from your overall income. The largest amount is primarily the profits; however, you can also claim other costs such as repairs and management fees.
The advantageous are only kick in when the property is earning income.
Capital revenuesOne of the main motives to own a property is for capital venture. Yes, you’ll pay capital gains on the increased value of the property when you sell, but the tax benefits along the way can be quite significant. Ideal property investment advice is your principle place of residence becomes tax free. It does not signify property investment advice but is based on current tax laws and their interpretation.
I will advice you, if you already purchased your home you can use the equity in that property to support finance your investments. Banks may then be proficient to lend you complete loan amount as your home can be used as security.
These issues, along with lack of a stable market condition can have an unfavorable effect on the stock market of the country in question, which will anyway ward off potential foreign investors.
December 7th, 2009
posted in Property Investment
Finance, Credit, Investments – Economical Categories. Modern Interpretation
Scientific works in the theories of finances and credit, according to the specification of the research object, are characterized to be many-sided and many-leveled.
The definition of totality of the economical relations formed in the process of formation, distribution and usage of finances, as money sources is widely spread. For example, in “the general theory of finances” there are two definitions of finances:
1) “…Finances reflect economical relations, formation of the funds of money sources, in the process of distribution and redistribution of national receipts according to the distribution and usage”. This definition is given relatively to the conditions of Capitalism, when cash-commodity relations gain universal character;
2) “Finances represent the formation of centralized ad decentralized money sources, economical relations relatively with the distribution and usage, which serve for fulfillment of the state functions and obligations and also provision of the conditions of the widened further production”. This definition is brought without showing the environment of its action. We share partly such explanation of finances and think expedient to make some specification.
First, finances overcome the bounds of distribution and redistribution service of the national income, though it is a basic foundation of finances. Also, formation and usage of the depreciation fund which is the part of financial domain, belongs not to the distribution and redistribution of the national income (of newly formed value during a year), but to the distribution of already developed value.
This latest first appears to be a part of value of main industrial funds, later it is moved to the cost price of a ready product (that is to the value too) and after its realization, and it is set the depression fund. Its source is taken into account before hand as a depression kind in the consistence of the ready products cost price.
Second, main goal of finances is much wider then “fulfillment of the state functions and obligations and provision of conditions for the widened further production”. Finances exist on the state level and also on the manufactures and branches’ level too, and in such conditions, when the most part of the manufactures are not state.
V. M. Rodionova has a different position about this subject: “real formation of the financial resources begins on the stage of distribution, when the value is realized and concrete economical forms of the realized value are separated from the consistence of the profit”. V. M. Rodionova makes an accent of finances, as distributing relations, when D. S. Moliakov underlines industrial foundation of finances. Though both of them give quite substantiate discussion of finances, as a system of formation, distribution and usage of the funds of money sources, that comes out of the following definition of the finances: “financial cash relations, which forms in the process of distribution and redistribution of the partial value of the national wealth and total social product, is related with the subjects of the economy and formation and usage of the state cash incomes and savings in the widened further production, in the material stimulation of the workers for satisfaction of the society social and other requests”.
In the manuals of the political economy we meet with the following definitions of finances:
“Finances of the socialistic state represent economical (cash) relations, with the help of which, in the way of planned distribution of the incomes and savings the funds of money sources of the state and socialistic manufactures are formed for guaranteeing the growth of the production, rising the material and cultural level of the people and for satisfying other general society requests”.
“The system of creation and usage of necessary funds of cash resources for guarantying socialistic widened further production represent exactly the finances of the socialistic society. And the totality of economical relations arisen between state, manufactures and organizations, branches, regions and separate citizen according to the movement of cash funds make financial relations”.
As we’ve seen, definitions of finances made by financiers and political economists do not differ greatly.
In every discussed position there are:
1) expression of essence and phenomenon in the definition of finances;
2) the definition of finances, as the system of the creation and usage of funds of cash sources on the level of phenomenon.
3) Distribution of finances as social product and the value of national income, definition of the distributions planned character, main goals of the economy and economical relations, for servicing of which it is used.
If refuse the preposition “socialistic” in the definition of finances, we may say, that it still keeps actuality. We meet with such traditional definitions of finances, without an adjective “socialistic”, in the modern economical literature. We may give such an elucidation: “finances represent cash resources of production and usage, also cash relations appeared in the process of distributing values of formed economical product and national wealth for formation and further production of the cash incomes and savings of the economical subjects and state, rewarding of the workers and satisfaction of the social requests”. in this elucidation of finances like D. S. Moliakov and V. M. Rodionov’s definitions, following the traditional inheritance, we meet with the widening of the financial foundation. They concern “distribution and redistribution of the value of created economical product, also the partial distribution of the value of national wealth”. This latest is very actual, relatively to the process of privatization and the transition to privacy and is periodically used in practice in different countries, for example, Great Britain and France.
“Finances – are cash sources, financial resources, their creation and movement, distribution and redistribution, usage, also economical relations, which are conditioned by intercalculations between the economical subjects, movement of cash sources, money circulation and usage”.
“Finances are the system of economical relations, which are connected with firm creation, distribution and usage of financial resources”.We meet with absolutely innovational definitions of finances in Z. Body and R. Merton’s basis manuals. “Finance – it is the science about how the people lead spending `the deficit cash resources and incomes in the definite period of time. The financial decisions are characterized by the expenses and incomes which are 1) separated in time, and 2) as a rule, it is impossible to take them into account beforehand neither by those who get decisions nor any other person”. “Financial theory consists of numbers of the conceptions… which learns systematically the subjects of distribution of the cash resources relatively to the time factor; it also considers quantitative models, with the help of which the estimation, putting into practice and realization of the alternative variants of every financial decisions take place”.
These basic conceptions and quantitative models are used at every level of getting financial decisions, but in the latest definition of finances, we meet with the following doctrine of the financial foundation: main function of the finances is in the satisfaction of the people’s requests; the subjects of economical activities of any kind (firms, also state organs of every level) are directed towards fulfilling this basic function.
For the goals of our monograph, it is important to compare well-known definitions about finances, credit and investment, to decide how and how much it is possible to integrate the finances, investments and credit into the one total part.
Some researcher thing that credit is the consisting part of finances, if it is discussed from the position of essence and category. The other, more numerous group proves, that an economical category of credit exists parallel to the economical category of finances, by which it underlines impossibility of the credit’s existence in the consistence of finances.
N. K. Kuchukova underlined the independence of the category of credit and notes that it is only its “characteristic feature the turned movement of the value, which is not related with transmission of the loan opportunities together with the owners’ rights”.
N. D. Barkovski replies that functioning of money created an economical basis for apportioning finances and credit as an independent category and gave rise to the credit and financial relations. He noticed the Gnoseological roots of science in money and credit, as the science about finances has business with the research of such economical relations, which lean upon cash flow and credit.
Let’s discuss the most spread definitions of credit. in the modern publications credit appeared to be “luckier”, then finances. For example, we meet with the following definition of credit in the finance-economical dictionary: “credit is the loan in the form of cash and commodity with the conditions of returning, usually, by paying percent. Credit represents a form of movement of the loan capital and expresses economical relations between the creditor and borrower”.
This is the traditional definition of credit. In the earlier dictionary of the economy we read: “credit is the system of economical relations, which is formed while the transmission of cash and material means into the temporal usage, as a rule under the conditions of returning and paying percent”.
In the manual of the political economy published under reduction of V. A. Medvedev the following definition is given: “credit, as an economical category, expresses the created relations between the society, labour collective and workers during formation and usage of the loan funds, under the terms of paying present and returning, during transmission of sources for the temporal usage and accumulation”.Credit is discussed in the following way in the earlier education-methodological manuals of political economy: “credit is the system of money relations, which is created in the process of using and mobilization of temporarily free cash means of the state budget, unions, manufactures, organizations and population. Credit has an objective character. It is used for providing widened further production of the state and other needs. Credit differs from finances by the returning character, while financing of manufactures and organizations by the state is fulfilled without this condition”.
We meet with the following definition if “the course of economy”: “credit is an economical category, which represents relations, while the separate industrial organizations or persons transmit money means to each-other for temporal usage under the conditions of returning. Creation of credit is conditioned by a historical process of fulfilling the economical and money relations, the form of which is the money relation”.
Following scientists give slightly different definitions of credit:
“Credit – is a loan in the form of money or commodity, which is given to the borrower by a creditor under the conditions of returning and paying the percentage rate by the borrower”.
Credit is giving the temporally free money sources or commodity as a debt for the defined terms by the price of fixed percentage. Thus, a credit is the loan in the form of money or commodity. In the process of this loan’s movement, a definite relations are formed between a creditor (the loan is given by a juridical of physical person, who gives certain cash as a debt) and the debtor.
Combining every definition named above, we come to an idea, that credit is giving money capital of commodity as a debt, for certain terms and material provision under the price of firm percentage rate. It expresses definite economical relations between the participants of the process of capital formation. Necessity of the credit relations is conditioned, from one side, by gathering solid quantity of temporarily free money sources, and from the second side, existence of requests of them.
Though, at the same time we must distinguish two resembling concepts: loan and credit. Loan is characterized by:
· Here, the discussion may touch upon transmission of money and also things form one side (loaner) to another (borrower): a)under the owning of the borrower and, at the same time, b) under the conditions of returning same amount or same quantity and quality of the things;
· The loaning of money may bear no interest;
· Any person may take part in it.
With the difference with loan, credit, which is somehow a private occasion of the loan, represents:
· One side (loaner) gives to the second one (borrower) only money, and _ for temporal usage;
· It may not bear no interest (if the assignment doesn’t foresee something);
· In it creditor is not any person, but a credit organization (at the first place, banks).
So, a credit is the bank credit. To our mind, it is not correct to use “credit” and “loan” as the synonyms.
Banking crediting is the union of relations between bank (as a creditor) and its borrower. These relations touch upon:
a) Giving a certain amount of money to the borrower for definite purpose (though, we meet with the so-called free credits, aims and objects of crediting are not appointed in the assignment);
b) Its opportune returning;
c) Getting percentage rate from the borrower for using the sources under his/her disposal.
The essential foundation of the credit essence and its important element is existence of trust between the two sides (in Latin “credo”, from which comes the word “credit”, means “trust”).
From the position of circulation of money forms (in the abstraction, historical process of formation economical relations and social budget and banking systems expressed by them) comparing different definitions of finances and credit, the paradox conclusion appears: credit is the private occasion of finances. And truly, from the position of movement of the money forms, finances represent the process of formation and usage of the funds of cash means. Very often such movements are fulfilled without returning, but sometimes, it is possible to give loans from the budget for the investment projects of other needs. Also, when a manufacture or corporations use their cash funds and we mean the finances of industrial subject, such usage may be realized as inside the manufacture or corporation (there is no subject about returning or not returning of the usage), so gratis under conditions of returning. This latest is called commercial form because of transmitting the sources to others, but even in this occasion, it is the element of financial system of the manufacture and corporation.
From the point of cash means movement, main character of credit is the process of formation and usage of the funds of cash means under the conditions of returning and, as a rule, taking the value-percentage. If gating the credit value doesn’t take place (even in the exceptional occasions), according to the movement form, credit becomes a private occasion of finances, as from the net financial funds (consequently from the state budget) the loans which bear no interests may be used. If gating credit value takes place, by the appearance form, credit is discussed to be financial modification.
From the historical point of view, finances (especially in the sort of the state budget) and credit (beginning with usury, later commercial and banking) were developing differently for considering credit to be the part of finances. Though, from the genetic-historical point of view, previous loaners, before giving loan, needed gathering the permanent capital not returning, that is the net financial foundation. The banks analogously needed concentration of the important own capital for influxing the consumers’ means and for getting higher percentage rate under the conditions of returning. Herewith, exactly on the financial basis, in the sort of financial fund (which later partially becomes loan fund) part of the bank capital appears to be the reservation (insurance) part of the fund, which by nature is financial and not loan. So notwithstanding the essential distinctions between finances and credit form the genetic-historical point of view, credit appears to be formed from finances and represent their modification.
From the essential position of expressing economical relations of finances and credit, we meet with cardinal distinctions between these two categories. Which mostly expressed by the distinction of the movement forms notwithstanding they are returnable or not. Finances express relations in the aspects of distribution and redistribution of social product and part of the national wealth. Credit expresses distribution of the appropriate value only in the section of percentage given for loan, while according to the loan itself, a only a temporal distribution of money sources takes place.
Herewith, there is a lot of common between the finances and credit as from the essential point of view, so according to the form of movement. At the same time, there is a significant distinction between finances and credit as in the essence, so in the form too. According to this, there must be a kind of generally economical category, which will consider finances and credit as a total unity, and in the bounds of this category itself, the separation of the specific essence of the finances and credit would take place.
Funding of the cash means is common to the researched economical categories. It takes place in any separate system of finances and credit, which have been touched upon during the analyses of defining finances and credit. Word combination “funding of the cash sources (fund formation)” reflects and defines exactly essence and form of economical category of more general character, those of finances and credit categories. Though in the in economical texts and practice, it is very uncomfortable to use a termini, which consists of three words. Also, “unloading” with an information hardens greatly its influxing into the circulation even in the conditions of its strict substantiation and thoroughness.
In the discussing context we consider:
1) wide and narrow understanding of economical category of the finances;
2) discussing finances in narrow understanding under general traditional meaning;
3) discussing finances, as funding of the cash means, in wide understanding, which concerns finances – in narrow meaning and credit – in complete meaning.
Termini “funding” and its equivalent “fund formation” are used by us as the purposeful structuring of cash means, which is based on two poles – accumulation of money sources (gathering) and its usage for definite purpose in the way of financing and crediting.
We have established a new termini – “finance-investment sphere” (FIS). Analyses about interrelation of finances and credit made by us give us an opportunity of proving, that in the given termini, the word “financial” is used with the meaning of funding cash sources, its purposeful structuring. In this process we consider at the same time financial, credit and investments’ economical categories.
Let’s sum up middle results of discussing new concept – “finance-investment sphere” and discuss its investment consisting parts.
The concept “investments” was brought into the native economical science from the West. In the Soviet economical science they for a long time used in the place “investments” the termini “capital placement”, which expressed the usage of the industrial factors in the sphere of real industrial activities during realization of capital projects. From one glance, this termini in its concept is identical to the “investments”, consequently it is possible to use them as synonyms. Though the termini “investments” and “investing” have the advantage towards the termini “capital placement” from linguistic and philological points of view, because they are expressed with one word. This is not only economical and comfortable in the process of working with the termini “investment” itself, but also it gives an opportunity of termini formation. More concretely: “investment process”, “investment domain”, “finance-investment sphere” – all these termini are much more acceptable.
Changing native economical termini with foreign ones is purposeful, if it really matters (by keeping parallel usage of the native termini for the inheritance). Though we must not change native economical termini into foreign ones all together, when by ordinal traditional language easy to explain private and narrow concrete processes and elements get their own termini. The “movement” of these termini is approved in the narrow professional bounds, but their “spitting out” into the economical science may turn economical language into the tangled slang.
Let’s discuss termini – “investment” and “capital placement’s” usage in the economical literature.
Investments are placement of funds into the main and circulation capital for the purpose of getting profit. “Investments in material assets – are the placements of funds into the mobile and real estate (land, buildings, furniture and so on). Investments in financial assets are the placements of funds into the securities bank accounts and other financial instruments”.
We don’t meet with the termini “investments” in the earlier economical dictionary, but we meet the combined termini “investment policy” – the union of the industrial decisions, which guarantee main directions of the capital investments, the activities of their concentration in the determinant suburbs, on which the reaching of planned rates of development of the society production is depended, balancing and effectiveness, getting more and more production and profit of the national income for every lost Ruble”. For today, in the most actual definitions, the capital investments are bounded only by financial means, when not only financial, but also the investment of natural, material-technical and informational resources takes place. Labour resources take an actual place in the investment process. They themselves fulfill this or that investment process.
A positive side of the discussed definitions is that they connect investment policy and capital placements (investments):
- economical development according to the key directions to the concentration;
- providing high rates of economical growth;
- raising an economical effectiveness, which is expressed:
a) by growing the throw off of the production and national income for every lost Ruble;
b) by fulfilling the branch structure of the investments;
c) by improving their technological structure;
d) by optimization of their further production structure.
Compared with such definition of the investments (capital placement) the definition of investments in the dictionary attaching the “Economics” seems to be unimproved: “investments – the expenses of gathering production and industrial means and increasing material reserve”. In this definition current expenses (production expenses) are mixed with the investment (capital) expense. Also, not the investment expenses but (though the investments are followed by the appropriate expenses) exactly advancing. It differs from the expenses by that the means (means) are put by returning the advanced values, also, under the conditions of growth, to which the concept-advanced capital is corresponding. the advancing may be realized in the money, natural-material and informational forms.
Except the termini “investments”, there are two more termini related with the investment. They are shown below.
“Human capital investment” – any activity provided for rising the workers labour productivity (in the way of growing their qualification and developing their abilities); at the expenses of improving the workers’ education, health and raising the mobility of the working forces”. It is very useful to use the mentioned termini, though it needs one correction: the human capital investments do not concern only workers, but also the servants, representatives of every kind of labour.
“Investment commodity, capital goods – a capital.”
In the official manuals of political economy of the reformation time the capital investments are discussed as “expenses for creating new main funds and widening, reconstruction and renewing the active ones”. In this definition the investments (capital placements) during separation of the forms (types) of further production of the main funds are bounded only by main funds (without increases of the circulation funds and insurance reserves): a) creating new ones; b) widening; c) reconstruction; d) renewing. Also, the concept of the industrial gathering appears, at the expenses of widening of basic, circulation funds and also insurance reserves takes place”.
You’ll meet below the definitions of investments from “the course of economy”: the investments are called “placements of fund into the basic capital (basic means of production), reserves, also other economical objects and processes, which request long-termed influxing of material and cash means. “According to the division of capital into physical and money forms, the investments too must be divided into material and cash investments”.
They apportion investment commodity, to which belong industrial and nonindustrial building objects, vehicles purposed for changing or widened technical park and the furniture, increasing reserves and others.
“They call the total investments of production an investment product, which is directed towards keeping and increasing the basic capital (basic means) and reserve. Total investments consist of two parts. One of them is called the depreciation; it represents important investment resources for compensation of renewal till the level of before industrial usage, wearing out and repairing of the basic means. Second consisting part of the total investments is represented by net investments – capital investments for the purpose of increasing basic means”. Depreciation is not a compensation resource of wearing the basic funds out, but it is the purposeful financial source of such resources.
Human capital investment is “a specific kind of investments, mostly in education and health protection”.
“Real investments are the investments in the economical branches and also, they are kinds of economical activities, which provide influxing the increases of real capital, that is increasing material values of the industrial means”. We can agree with such definition with one specification that material and nonmaterial values too belong to the real capital (wealth), consequently science-researching experimental-construction results, various information, education of he workers and others. Such service as organization of the excitable games, also the service of redistribution social wealth from one private person to another (except charity).
“Financial investments represent placement of funds into the shares, obligations, promissory notes, other securities and instruments. Such investments, of course, do not give increases of the real material capital, but they help getting profit, consequently at the expenses of changing the course of the securities in the time of speculation, or distinguishing the course in different places of sell and purchasing”. We share wholly such definition, hence it follows that financial investments (if it is not followed by real investments as a result) do not increase real material wealth and real nonmaterial wealth. According to this context, the expression below is very important: “we must distinguish financial investments, which represent placement of the funds in the ways of selling and purchasing the securities for the purpose of getting profit and financial investments, which become cash and real, moved to real physical capital.”
In the “economical course” quoted before long and short-termed investments are separated. Recognizing the existence of the bounds between them, the authors ascribe short-termed investments to “one month or more” investments. If we get such conditioned criteria, that we can call the investments which overcome the terms of some months, long-termed ones, which is very doubtful and we don’t agree with it. A long-termed character of the fund placement is a significant feature of the investments (short-term doesn’t combine with the concept of investments). Principally, it would be better to point out quick compensative, middle termed compensative and long-termed compensative investments:
- less then 6 months – quick compensative;
- from 6 months up to the year and a half – middle termed compensative;
- more then the year and a half – long termed compensative.
We stopped at the definition of the investments in the capital work “economical course” for the special purpose, as, in it the author tried to discuss the concept of investments systemically and quite completely, herewith the book is published just now.
We’ll return to the discussion the definition economical category of “investments” in different publications in the following chapter. The definitions given here are quite enough for having a notion of the level of lighting up the given category in the economical literature.
What conclusions may be made according the definition of the mentioned economical category in the published works, except the made notions and specifications?
There is quite deeply, concretely and thoroughly defined the concept of “investments”, different definitions in the economical literature; but mostly in every works about the investments discussed by us until now, there is not opened the essence of investments as an economical category. In every monograph, even if it has a title investment, as an economical category, there is given only the definition, concept of investments. But, as the Academician Vasil Chantladze explains, “a concept is a discussion, which proves something about the distinguishing feature of the researched object. A concept out of much essential characteristic features represents only one, and essential in it is only – definition”.
But the categories are much wider; it is “a key, the most fundamental concept of every science”. Economical categories theoretically represent real, objectively existed productive relations. A category is the defining of occasions of existed characters, connections, relations of the objective world. Generally, any educational process is fulfilled by the categories, which give opportunities for dividing the processes and occasions semantically, for expressing the definitions of a subject and realize their specific peculiarities and economical relations of a material world.
Our goal is exactly to substantiate investments – as an economical category and also, as a financial category in the narrow understanding.
Here we apply for another manual thesis made by the academician Vasil Chantladze: “every financial relation is an economical one and every financial category is and economical one, but not every economical relation and economical category is financial relation and financial category”.
In the process of defining the investments, it is important to take in mind the sides of resources, expenses and incomes, because investment, from one side, is the result of the manufacture’s activity, and, from another one, – a part of income, which, in this case, is not used for usage.
Another occasion: it is advisable to discuss investments in two aspects: as a category of reserve and flow, which will reflect exactly the connection between “placement of funds” and “investments”.
As we’ve mentioned above, not long ago, in the well-known Soviet literature the concepts of “the placement of funds” and “investments” were accepted to be the synonyms and concerned to be investment of sources for further production of the main funds and formation of the turnover funds. We meet with such understanding of the concept of “investment” (here, they separate three types of the investment expenses: investments in the basic capital of investments, investments in the house building and investments in the reserves) in the modern economical publications and it is mostly used on the macro level during a statistical analyze of economical processes. In this concrete occasion investment is the category of reserve.
According to the aspect of flow the investments may be discussed in the process of analyzing industrial activity, when it is necessary to learn the variety of the economical relations related with the investments’ further production and formation, sources, objects and subjects, that is on the micro level.
Main distinguishing criteria of different methods of approach towards the concept of “investment” the aspect of prolonging of measuring this showing. Is it possible or not to measure the investment showing separate from the term factor (the norm of gathering, the volume of capital property, the reserves of production and so on). If it is possible, then it is the category of reserve, and if it is not, then it is measured in the section of time and belongs to the category of flow.
Thus, investment, as an economical category, is quite consuming concept. It concerns the elements defining the regularities of function and regulation of the investment domain, privately:
First, resources and values put into the industrial activity. Here, investments may be realized in the following ways:
1. mobile and real estates (buildings, constructions, furniture and other material values);
2. cash sources, purposeful bank accounts, credits, shares and other long-termed securities;
3. owners rights according to the author’s rights, licenses, Now-How, experience and other intellectual values;
4. the rights for using land and other natural resources, also other owners rights.
Notwithstanding any forms, investments are results of capital gathering. Leading investments – regularity of gathering defines its volume and dynamics and, generally, whole investment activity.
Second, the incomes ruling volume and dynamics of the resource investment. Herewith, we must underline the circumstance, that the process of getting profit, the regularity of its creation, isn’t a constant of the concept “investment”. The factors of production (also the conditions of exploitation of capital values) and selling (market conjuncture), also the process of capital gathering is the leading and important condition only for the investment formation. Though, we underline again, that the process of getting and distributing the income is a significant component of the investment activity.
The transformation of investments makes the basis for the investment activity, which concern the following circles: resources – investment (expense) – capital property – income. The practice of realization such circles of the investments transformation is exactly the investment activity (investing). The investment activity, except the investments itself, concern motivation and stimulation of the capital gathering, relations of capital gathering and ruling, also, totality of the defined level of profitability on the capital and the goals of capital growth.
According to the mentioned above, in the definitions of the investment as economical category sometimes the needed exactness and clearness is not felt, some categories of the wealth are represented tightly enough. For example, real prosperity is bounded only by material estimation. This leads us to the unvalued investment resources in the era of transformation industrial society into the investment one; also to the recognition of yet uninvolved valuable scientific researches in the production, securities turned into speculation objects, and unreal property in the consistence of one and the same parts; to there equalization. On the basis of the made analyses, we can cite a wide definition of the investments together with the leading categories.
Investment resources – are values, invested into this or that project in this or that kind for the purpose of getting profit beginning with material ones, finished with cash.
Kinds of the prosperity are equal to the kinds of the investment resources and is divided into real and cash, consequently into financial resources.
Real investment resources concern all kinds:
- natural resources;
- labour resources;
- material resources, the usage of which is possible in the economical development (buildings, constructions, vehicles and furniture, transport and communication means and so on;
- investment resources (in the widest understanding, that is from scientific-research and experimental-construction works, till the education potential of the society and till all kinds of gathering useful information, written about every possible, that is typing and electronic bearer).
Cash, consequently financial resources concern every cash means for usage in this way in definite conditions or directed in the sort of investments.
Cash means (resources) turn into the financial resources in the case of structuring of funds of purposeful destination foreseen for investments of this or that kind.
After defining investment resources we can make wide definition of the investments as economical category.
Investments – are the placements of real, financial and intellectual resources into the projects, the fulfillment of which leads us to getting the increases from real wealth, in the material and informational forms. It is followed by a cash (financial) prosperity or its increases (at the expenses of the distribution of the cash means).
December 7th, 2009
posted in Investment News
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December 7th, 2009
posted in Property Investment
INTRODUCTION
One of the outstanding features of globalization in the financial services industry is the increased access provided to non-local investors in several major stock markets of the world. Increasingly, stock markets from emerging markets permit institutional investors to trade in their domestic markets. Indian stock market opened to Foreign Institutional Investors in 14th September 1992, initially with lot of restrictions. The regulation on them are liberalized and minimized now, since 1993 has received a considerable amount of portfolio investment from foreigners in the form if FIIs investment in equities. This has become a turning point of India stock market. The government of India announced the policy of the government to permit the FII investment in India capital market. According to the SEBI modified the regulation on 14-11-1995. In order to make investment in India equity market they wanted to register with Security Exchange Board of India as foreign institutional investors. It is possible for foreigners to trade in India securities without registering as Foreign Institutional investors, but such cases require approval from Reserve Bank of India or the Foreign Institutional Promotion Board. They are generally concentrated in secondary market.
Domestic market alone not able to meet the growing capital requirement of the country and financing from mutilated institution has lost primary in the emerging in the global order .Besides aimed primarily at ensuring non-debt creating capital inflows at a time of extreme balance of payment crisis. It was to tie over the balance of payment crisis in the early 1990s
Portfolio flows often referred to as ‘hot- money’ are notoriously volatile capital flows. They have also responsible for spreading financial crisis causing contagion in international market. Evan though, the FIIs have been plying a key role in the financial markets since their entry into this country. The explosive portfolio flow by FII brings with them great advantages as they are engine of growth, lowering cost of capital in many emerging market. This opening up of capital markets in emerging market countries has been perceived as beneficial by some researchers while others are concerned about possible adverse consequences.
Clark and Berko (1997) emphasize the beneficial effects of allowing foreigners to trade in stock markets and outline the “base-broadening” hypothesis. The perceived advantages of base-broadening arise from an increase in the investor base and the consequent reduction in risk premium due to risk sharing. Other researchers and policy makers are more concerned about the attendant risks associated with the trading activities of foreign investors. They are particularly concerned about the herding behavior of foreign institutions and the potential destabilization of emerging stock markets.
This study addresses these issues in the context of foreign institutional investors’ (FII) trading activities in a big emerging market – India. India liberalized its financial markets and allowed FIIs to participate in their domestic markets in 1992. Ostensibly, this opening up resulted in a number of positive effects. First, the stock exchanges were forced to improve the quality of their trading and settlement procedures in accordance with the best practices of the world. Second, the information environment in India improved with the advent of major international financial institutional investors in India. On the negative side we need to consider potential destabilization as a result of the trading activity of foreign institutional investors. This is especially important in an emerging country that has embarked upon reforms to open up its market.
OBJECTIVES The objectives of this study were as follows;
(1) To study the role of FII investment in the Indian stock market, ( 2 ) To examine the causal relationship between net FII investment and BSE sensex using granger causality test (3) To examine the causal relationship between net FII investment and NSE sensex using granger causality test (4 )To examine whether FIIs were a channel of global disturbance into the Indian stock market.
TOOLS: Study was carried out with the help of unit root test, co integration test, causal regression and F statistics for FII investment and index from BSE and NSE
LETERATURE REVIEWS
Gayathri Devi .R in 2003, she conducted study on “Causal Relationship between FIIs and Stock Market: A critical study”. It revealed that there was long run relationship between net FII investment and sensex, FII investment did not respond the short-run changes or technical-position of the market and they were more driven by fundamentals, and FII investments did granger cause India stock market. “Selen Serisoy Guerin” in 2006, conducted study on “The Role of Geography in Financial and Economic Integration: A comparative Analysis of foreign direct investment, Trade and Portfolio Investment Flows”.. It found support for the argument that most FDI among Industrial countries were horizontal, whereas most FDI investment in developing countries was vertical and our results indicated that portfolio investment flows compared to FDI, were highly sensitive to change in GDP per capita, this implied that if there was a negative output stock, portfolio investment flows would be more volatile than FDI. A.Julia Priya, D. Lazar and Joseph Jeyapual in 2005, they conducted study on “Role of Foreign Institutional Investors on stock market development in India”, Results revealed that sensex, market capitalization of NSE, Turnover of BSE and NIFTY without market capitalizations were influenced by Foreign Institutional Investors“Suchismita Bose and Dipankor coondoo” in 2004, they conducted study on “The Impact of FII Regulation in India”,. These results strongly suggested The liberalization policies had the desired expansionary effect and had either increased the mean level of FII inflows and/or the sensitivity of these flows to a change in BSE returns and /or the Parthapratim pal in 2004 conducted study entitled as “Recent volatility in stock markets in India and foreign institutional investors. Findings of this study indicated that Foreign institutional investors had emerged as the most dominant investor group in the domestic stock market in India. Particularly, in the companies that constitute the Bombay stock market sensitivity index, their level of control was very highinertia of these flows.
“sandhya Ananthanaryanan, Chandrasekhar krishnamurthi and Nilajan Sen in 2003 conducted study as “Foreign institutional Investors and Security Returns: Evidence from Indian Stock Exchanges”, It found strong evidence consistent with the base-broadening hypothesis.It did not find compelling confirmation regarding momentum or contrarian strategies being employed by FIIs.It supported price pressure hypothesis.
It did not find any substantiation to the claim that foreigner’ destabilize the market. J.S. Pasricha and Umesh.C.Singh in 2001, tried to analyze the impact of FIIs investment on Indian capital market. Their study revealed that FII are here to stay and have become the integral part of Indian capital market. Their entry has led to greater institutionalization of the market. They have brought transparency in the market operations.S.S.S. Kumar in 2001, attempted in his study to find the effect of FIIs on the Indian stock market. The inference analysis of the paper suggests that FII investments are more driven by market fundamentals rather than by short term changers or technical position of the market. As per K. Seethapathi and V. Subbulakshmi study entitled “Foreign investment: Need for focus”, They concluded that, the flows have to pick up. The political will is to be demonstrated by the government. In addition, the regulators have to identify the reasons for failure in converting approvals into actual investments and those issues are to be addressed immediately. E. Han Kim and Vijay Singal in 1997, they conducted study entitled “Are open market Good for Foreign Investors and Emerging Nations?”, Conclusion revealed as. Integrating the emerging stock markets into world markets has had benefits, and will continue to have benefits for both global investor and host countries. The end result of integrated markets a better allocation of resources, improved productivity of capital, and a higher standard of living.
THEORETICAL REVIEW
Between late 1990 and the middle of 1991, the economy faced severe balance of payment difficulties, coming close to defaulting on its external payment obligations in January and June of 1991. In January 1991, the Government negotiated with the International Monetary Fund (IMF) for loans. What followed was the implementation of the conventional IMF-World Bank prescription of short-term ‘stabilization’, consisting of devaluation, temporary import compression, fiscal and monetary compression with a rise in interest rates, followed by more long-term ‘structural adjustment’ measures, seeking to restructure the domestic economy.
The New Economic Policy was an outcome of implementation of the ‘structural adjustment’ program. The ‘economic reforms’ or ‘economic liberalization’ program, which began to be implemented with the announcement of the New Economic Policy (NEP), included wide-ranging changes in industrial policy, trade policy and foreign investment policy, a redefinition of the role of the public sector in the economy and redesigning the architecture of the domestic financial system. By narrowing down the topic, first it concentrates on capital account liberalization.
CAPITAL ACCOUNT LIBERALIZATION
The process of capital account liberalization in India needs to be situated in its wider context, for it was shaped by the reality in the national context and the conjuncture in the international context. In response to the external debt crisis, which surfaced in 1991, the government set in motion a process of stabilization, adjustment and reform. Economic liberalization and structural reforms sought to increase the degree of openness of the economy through trade flows, investment flows, technology flows and capital flows. The process began the introduction of convertibility on trade as quantitative restrictions on imports, except for with consumer goods were dismantled and tariff levels were reduced. It was combined with a liberalization of the regimes for foreign investment and foreign technology. And restrictions on international economic transactions, including capital movements, were progressively reduced. This process was also influenced by the gathering momentum of globalization which was associated with increasing economic openness in trade flows, investment flows and financial flows.
The approach to capital account liberalization in India was much more cautious. What was liberalized was specified. Everything else remained restricted or prohibited. The contours of liberalization of the capital account were, in large part, shaped by the salutary lessons of the external debt crisis which surfaced in early 1991 and brought India close to default in meetings its international obligations. The balance of payments situation, then, was almost unmanageable.
The vulnerability was accentuated by two factors: it became exceedingly difficult to roll-over short-term debt in international capital markets and there was capital flight in the form of withdrawals from deposits held by non-resident Indians. This experience dictated the parameters of capital account liberalization8. It prompted strict regulation of external commercial borrowing especially short-term debt. It led to a systematic effort to discourage volatile capital flows associated with repatriable non-resident deposits. Most important, perhaps, it was responsible for the change in emphasis and the shift in preference from debt creating capital flows to non-debt creating capital flows. To some extent, the liberalization that was introduced was also influenced by the perceived needs of the economy: financing the current account deficit, mobilizing resources for investment and attracting international firms. But capital account convertibility remained, fortunately, in the realm of rhetoric. The Mexican crisis in late 1994 was, ironically enough, a blessing in disguise for India. It was not just an early warning signal. It dampened the enthusiasm of those who advocated capital account liberalization with a big bang. It lent support to those who questioned the wisdom of capital account convertibility that would have been premature in every sense. The contours of capital account liberalization in India were determined by these factors.
In sketching these contours, it is necessary to distinguish between different forms of private capital inflows and outflows, as there are important differences between these categories in the nature and the degree of liberalization. A complete description would mean too much of a digression. For our purpose, it would suffice to consider the contours of liberalization in the following categories of capital account transactions:
• Direct investment,
• Portfolio investment, and
• Non-resident deposits.
Foreign Direct Investment
It is defined as a long-term investment by a foreign direct investor in an enterprise resident in an economy other than that in which the foreign direct investor is based. The FDI relationship consists of a parent enterprise and a foreign affiliate which together form a transnational corporation (TNC). In order to qualify as FDI the investment must afford the parent enterprise control over its foreign affiliate.
The liberalization of the policy regime for direct foreign investment began in July 1991 with two major decisions. First, direct foreign investment with up to 51 per cent equity was to receive automatic approval in selected high priority industries subject only to a registration procedure with the Reserve Bank of India. Second, a Foreign Investment Promotion Board was constituted to consider all other proposals for direct foreign investment where approval was not constrained by pre-determined parameters and procedures. In effect, this created a dual route for inflows of direct foreign investment. The approval was automatic, within the specific parameters, from the Reserve Bank of India, while all other inflows were subject to approval through the Foreign Investment Promotion Board. The access through the automatic route has been progressively enlarged over time. Needless to add, outflows associated with direct foreign investment are not subject to any restrictions, but this was so even in the era of capital controls.
Foreign Portfolio Investment (FPI)
Portfolio investment represents passive holdings of securities such as foreign stocks, bonds, or other financial assets, none of which entails active management or control of the securities’ issuer by the investor; where such control exists, it is known as foreign direct investment.
The liberalization of the policy regime was extended to portfolio investment in September1992. To begin with, foreign institutional investors such as pension funds or mutual funds were allowed to invest in the domestic capital market subject simply to registration with the Securities and Exchange Board of India. Guidelines issued by the Reserve Bank of India permitted such foreign institutional investors to invest in the secondary market for equity subject to a ceiling of 5per cent (subsequently raised to 10 per cent) for individual foreign institutional investors in a single Indian firm with an overall limit at 24 per cent of equity (later relaxed to 30 per cent of equity at the option of the firm) for total foreign institutional investment in a single Indian firm. Foreign portfolio investment further classified into
1. FIIs
2. ADR/GDR, and
3. Offshore funds.
Foreign institutional investors (FIIs)
One who propose to invest their proprietary funds or on behalf of “broad based” funds or of foreign corporates and individuals and belong to any of the under given categories can be registered for FII.
• Pension Funds
• Mutual Funds
• Investment Trust
• Insurance or reinsurance companies
• Endowment Funds
• University Funds
• Foundations or Charitable Trusts or Charitable Societies who propose to invest on their own behalf, and
• Asset Management Companies
• Nominee Companies
• Institutional Portfolio Managers
• Trustees
• Power of Attorney Holders
• Bank
Access was provided to foreign institutional investors in the secondary market for debt. Soon thereafter, foreign institutional investors were also allowed investment or placement in the primary market, subject to approval from the Reserve Bank of India, with a maximum limit of 15per cent of the new issue. It was some time before foreign institutional investors were permitted investment in government securities in the primary and secondary markets. This came in 1996-97 and was subject to the ceiling for external commercial borrowing. Subsequently, in 1998-99, foreign institutional investors were also permitted to invest in treasury-bills. There is no reserve requirements stipulated for, or taxes imposed on, these capital inflows. It also needs to be said that foreign institutional investors are allowed to repatriate the principal, the capital gains, the dividends, the interest and any other receipt from the sale of such financial assets, without any restriction, at the market exchange rate. The income tax rate for dividends on such portfolio investment for foreign institutional investors is 20 per cent, which is much lower than the corporate income tax rate for domestic or foreign firms. But foreign institutional investors are subject to a higher short-term capital gains tax at 30 per cent compared with 20 per cent for domestic investors, while the long-term capital gains tax is the same at 10 per cent. Sales of such financial assets for the purpose of repatriation are absolutely unrestricted, provided the sales are through stock exchanges. However, disinvestment through any other route, or in any other form, requires approval from the Reserve Bank of India.
Global Depositary Receipt:
Global Depositary Receipt A negotiable certificate held in the bank of one country representing a specific number of shares of a stock traded on an exchange of another country. American Depositary Receipts make it easier for individuals to invest in foreign companies, due to the widespread availability of price information, lower transaction costs, and timely dividend distributions. Also called European Depositary Receipt.
The option of portfolio investment was also made available to domestic corporate entities from September 1992. Indian firms were allowed access to international capital markets through global depository receipts or Euro convertible bonds which converted debt into equity after stipulated period. This access, however, was not automatic. Individual applications, drawn up inconformity with the general guidelines of the government, were subject to approval. This process remains unchanged.
Offshore Funds:
An offshore fund is a collective investment scheme domiciled in an Offshore Financial Centre, for example British Virgin Islands, Luxembourg, Cayman Islands or Dublin.
Similar facilities for portfolio investment were subsequently extended to Offshore funds, non-resident Indians (as individuals) and overseas corporate bodies, only for investment in shares or debentures through stock exchanges, on the same terms as foreign institutional investors, but subject to a ceiling of 5 per cent for individual non-resident Indians or overseas corporate bodies in a single Indian firm.
Among the various components of portfolio investment, FII comprises the bulk of portfolio inflows. The main objective of foreign institutional investors is to minimize risk and maximize returns by diversifying their portfolios internationally. Major determinants of investment decisions of FII are country and region specific.
Portfolio flows often referred to as ‘hot- money’ are notoriously volatile capital flows. They have also responsible for spreading financial crisis causing contagion in international market. Evan though, the FIIs have been plying a key role in the financial markets since their entry into this country. The explosive portfolio flow by FII brings with them great advantages as they are engine of growth, lowering cost of capital in many emerging market. This opening up of capital markets in emerging market countries has been perceived as beneficial by some while others are concerned about possible adverse consequences.
Among the most active FIIs are Morgan Stanely Asset Management, jardine Fleming, Capital International, J. Henery schorder, templeton, Warburg Pinkers, Internatioanl Alliance and Quantum fund.
Foreign Institutional Investors in India
India opened her doors to foreign institutional investors in September, 1992. This event represents a landmark event since it resulted in effectively globalizing its financial services industry. Initially, pension funds, mutual finds, investment trusts, Asset Management Companies, nominee companies and incorporated/institutional portfolio managers were permitted to invest directly in the Indian stock markets. Beginning 1996-97, the group was expanded to include registered university funds, endowment, foundations, charitable trusts and charitable. Since then, FII flows which form a part of foreign portfolio investments have been steadily growing in importance in India. Other than in the year 1998, the net flows have been positive. The nuclear tests and East Asian crisis did slow down the flows but as stated by Gordan and Gupta (2003), their effects were short lived. That the percentage of total net turnover of BSE, the share of average of FII sales and purchases increased from 2.6 percent in 1998 to 5.5 percent in 2002. The cumulative net FII investment in India as on August 2003 is approximately $17400 million. As of August 2003 net FII investment was 9 percent of the BSE market capitalization which is small compared to the size of the market. However, in the words of Banaji (2002), it is not the market capitalization that matters but what is important is the level of the free float, that is, the shares that are actually publicly available for trading. With floating stock in the Indian market being less than 25 percent, about 35 percent of the free float available has been bagged by FIIs – despite the fact that they invest in just a few highly liquid stocks.
Though India receives hardly 1 percent of the FII investments in emerging markets, the portfolio flows to India have been less volatile when compared with that of many other emerging markets (Gordan and Gupta, 2003). FIIs by adopting a bottom-up approach seem to invest in top-quality, high growth, large cap stocks (Gordan and Gupta, 2003). Sytse et al. (2003) provide empirical evidence that foreign institutional investors in India, invest in large, liquid companies which enable them to exit their positions quickly at relatively lower cost and also that the foreign institutional owners have a larger impact than foreign corporate owners when performance is measured using stock market valuation criterion.
India is one of the fastest growing economies in South Asia, promising a growth of over 9 percent, second only to China, it would not be a surprise to see increased FII flows to India in the future. FIIs are now looking at the economy as a whole, with the macro-economic factors also playing their role in attracting foreign investors. Factors like a strong currency, key reforms in the banking, power and telecommunications sector, increased consumer spending and stable policies are expected to play a major role in attracting FIIs to India. The Securities Exchange Board of India (SEBI) along with the Institute of Chartered Accountants of India (ICAI) jointly monitor the markets and announces the regulatory measures thus making the Indian companies more transparent and more disciplined.
According to the April 2005 report on corporate governance by CLSA Emerging Markets, India ranks fourth with a score of 55.6 percent. Banaji (2000) emphasizes that the capital market reforms like improved market transparency, automation, dematerialization and regulations on reporting and disclosure standards were initiated because of the presence of the FIIs. But FII flows can be considered both as the cause and the effect of capital market reforms. The market reforms were initiated because of the presence of FIIs and this in turn has lead to increased flows.
The Government of India gave preferential treatment to FIIs till 1999-2000 by subjecting their long term capital gains to lower tax rate of 10 percent while the domestic investors had to pay higher long-term capital gains tax. The Indo-Mauritius Double Taxation Avoidance Convention 2000 (DTAC), exempts Mauritius-based entities from paying capital gains tax in India – including tax on income arising from the sale of shares. This gives an incentive for foreign investors to invest in Indian markets taking the Mauritius route. Consequently, we now see investments coming from Mauritius while there were none before 2000.
The country wise distribution of the FIIs registered in India, with majority of them coming from USA and UK. Chakrabarti (2002) and Rao et al. (1999) point out the fact that due to existing inter-linkages, the source of the FII investment might not be the country from where the institution operates. Nevertheless, the figure gives us an idea of the country wise distribution of the FIIs in India. So as to encourage long term investments in the Indian market, Budget 2003 proposed that investors who buy stocks of listed companies from March 1, 2003 be exempt from paying tax on the gains they make on their investments, provided they hold them for more than one year. With so much to benefit from, the FII investment in India is likely to increase in the future.
Regulation on FII
Investment by FII was jointly regulated by Securities and Exchange Board of India (SEBI) through the SEBI (Foreign Institutional Investors) Regulations, 1995 and by the Reserve Bank of India through Regulation 5(2) of the Foreign Exchange Management Act (FEMA), 1999. The promulgation of legislation pertaining to foreign investment by SEBI in 1995 market a watershed for FII flows to India; this led to a significant increase in the level of FII equity inflows in the pre-Asian crisis period. The SEBI FII Regulations and RBI policies are amended and modified from time to time in response to the gradual maturing of the Indian financial market and changes taking place in the global economic scenario.
In order to trade in India equity market, foreign corporation need to register with SEBI as Foreign Institutional Investors. Without registration they can invest, but cases require the approval from RBI. They are generally concentrated in secondary market. FII are allowed to invest in
a) Securities in primary and secondary market including shares, debentures and warrant of companies, unlisted, listed or to be the listed in India.
b) Units of mutual funds
c) Dated government securities
d) Derivative traded in a recognized stock market and
e) Commercial papers
FII can invest their own funds as well as invest on behalf of their over seas clients registered as such with SEBI. These client accounts that the FII manages are known as ‘sub accounts’. FII sub accounts include those foreign corporate, foreign individual, institution funds or portfolio established or incorporated out side India.
FII may issue deal in or hold off share derivative instrument such as participatory notes (PN). The entities that can subscribe to the PN are : a) Any entity incorporated in a jurisdiction that requires filing of constitutional or other documents with a registrar of companies or comparable regulatory agency or body under the applicable companies legislation in that jurisdiction; b) Any entity that is regulated, authorized or supervised by a central bank, such as the Bank of England, or any other similar body provided that the entity must not only be authorized but also be regulated by the aforesaid regulatory bodies; c) Any entity that is regulated, authorized or supervised by a securities or futures commission, such as the Financial Services Authority or other securities or futures authority or commission in any country , state or territory ; d) Any entity that is a member of securities or futures exchanges such as the New York Stock Exchange or other self-regulatory securities or futures authority or commission within any country, state or territory provided that the aforesaid mentioned organizations which are in the nature of self- regulatory organizations are ultimately accountable to the respective securities financial market regulators.
Investment limit
As per the September 1992 policy permitted foreign institutional investment registered FII could individually invest in a maximum of 5% of a company’s issued capital and all FIIs together up to a maximum of 24%. From November 1996 are allowed to make 10 percentage investment in debt securities subject to the specific approval from SEBI as a separate category of FIIs or sub accounts as 100% debt fund investment such investment were of occurs subjected to the fund specific ceiling prescribed by SEBI and had to be within overall ceiling US 1.5 $. The investment was however, restricted to the debt instrument of companies listed or to be listed on the stock exchanges. In 1997, the aggregate limit on investment by FIIs was allowed to be raised from 24% to 30% by then board of directors of individual companies by passing a resolution in their meeting and by special resolution to that effect in the company’s Board meeting. In June 1998 the 5% individual limit was raised to 10%.In March 2000, the ceiling on aggregate FII portfolio investment increased to 49%.This was subsequently raised to 49%, on March 8 2001, Finance minister announced February 28 2002 that foreign institutional investors can invest in accompany under the portfolio investment rout beyond 24% of the paid up capital of the company with the approval of the general body of the share holders by a special resolution.
Benefits and costs of FII investments
The terms of reference asking the Expert Group to consider how FII inflows can be
encouraged and examine the adequacy of the existing regulatory framework to adequately address the concern for reducing vulnerability to the flow of speculative capital do not include an examination of the desirability of encouraging FII inflows. Yet, for motivating the consideration of the policy options, it is useful to briefly summarize the benefits and costs for India of having FII investment. Given the Group’s mandate of encouraging FII flows, the available arguments that mitigate the costs have also been included under the relevant points.
Benefits
Reduced cost of equity capital
FII inflows augment the sources of funds in the Indian capital markets. In a commonsense way, the impact of FIIs upon the cost of equity capital may be visualized by asking what stock prices would be if there were no FIIs operating in India. FII investment reduces the required rate of return for equity, enhances stock prices, and fosters investment by Indian firms in the country.
Imparting stability to India’s Balance of Payments
For promoting growth in a developing country such as India, there is need to augment domestic investment, over and beyond domestic saving, through capital flows. The excess of domestic investment over domestic savings result in a current account deficit and this deficit is financed by capital flows in the balance of payments. Prior to 1991, debt flows and official development assistance dominated these capital flows. This mechanism of funding the current account deficit is widely believed to have played a role in the emergence of balance of payments difficulties in 1981 and 1991. Portfolio flows in the equity markets, and FDI, as opposed to debt-creating flows, are important as safer and more sustainable mechanisms for funding the current account deficit.
Knowledge flows
The activities of international institutional investors help strengthen Indian finance. FIIs advocate modern ideas in market design, promote innovation, development of sophisticated products such as financial derivatives, enhance competition in financial intermediation, and lead to spillovers of human capital by exposing Indian participants to modern financial techniques, and international best practices and systems.
Strengthening corporate governance
Domestic institutional and individual investors, used as they are to the ongoing practices of Indian corporates, often accept such practices, even when these do not measure up to the international benchmarks of best practices. FIIs, with their vast experience with modern corporate governance practices, are less tolerant of malpractice by corporate managers and owners (dominant shareholder). FII participation in domestic capital markets often lead to vigorous advocacy of sound corporate governance practices, improved efficiency and better shareholder value.
Improvements to market efficiency
A significant presence of FIIs in India can improve market efficiency through two channels. First, when adverse macroeconomic news, such as a bad monsoon, unsettles many domestic investors, it may be easier for a globally diversified portfolio manager to be more dispassionate about India’s prospects, and engage in stabilsing trades. Second, at the level of individual stocks and industries, FIIs may act as a channel through which knowledge and ideas about valuation of a firm or an industry can more rapidly propagate into India. For example, foreign investors were rapidly able to assess the potential of firms like Infosys, which are primarily export-oriented, applying valuation principles that prevailed outside India for software services companies.
Costs
Herding and positive feedback trading
There are concerns that foreign investors are chronically ill-informed about India, and this lack of sound information may generate herding (a large number of FIIs buying or selling together) and positive feedback trading (buying after positive returns, selling after negative returns). These kinds of behavior can exacerbate volatility, and push prices away from fair values. FIIs’ behavior in India, however, so far does not exhibit these patterns. Generally, contrary to ‘herding’, FIIs are seen to be involved in very large buying and selling at the same time. Gordon and Gupta (2003) find evidence against positive-feedback trading with FIIs buying after negative returns and vice versa.
BoP vulnerability
There are concerns that in an extreme event, there can be a massive flight of foreign capital out of India, triggering difficulties in the balance of payments front. India’s experience with FIIs so far, however, suggests that across episodes like the Pokhran blasts, or the 2001stock market scandal, no capital flight has taken place. A billion or more of US dollars of portfolio capital has never left India within the period of one month. When juxtaposed with India’s enormous current account and capital account flows, this suggests that there is little evidence of vulnerability so far.
Possibility of taking over companies
While FIIs are normally seen as pure portfolio investors, without interest in control, portfolio investors can occasionally behave like FDI investors, and seek control of companies that they have a substantial shareholding in. Such outcomes, however, may not be inconsistent with India’s quest for greater FDI. Furthermore, SEBI’s takeover code is in place, and has functioned fairly well, ensuring that all investors benefit equally in the event of a takeover.
Complexities of monetary management
A policymaker trying to design the ideal financial system has three objectives. The policy maker wants continuing national sovereignty in the pursuit of interest rate, inflation and exchange rate objectives; financial markets that are regulated, supervised and cushioned; and the benefits of global capital markets. Unfortunately, these three goals are incompatible. They form the “impossible trinity.” India’s openness to portfolio flows and FDI has effectively made the country’s capital account convertible for foreign institutions and investors. The problems of monetary management in general, and maintaining a tight exchange rate regime, reasonable interest rates and moderate inflation at the same time in particular, have come to the fore in recent times. The problem showed up in terms of very large foreign exchange reserve inflows requiring considerable sterilization operations by the RBI to maintain stable macroeconomic conditions. The Government had to introduce a Market Stabilization Scheme (MSS) from April1, 2004.
With the foreign exchange invested in highly liquid and safe foreign assets with low rates of return, and payment of a higher rate of interest on the treasury bills issued under MSS,
sterilization involves a cost. With a rapid rise in foreign exchange reserves and the need for having an MSS-based sterilization involving costs, questions have been raised about the desirability of encouraging more foreign exchange inflows in general and FII inflows in particular. While there is indeed the issue of timing the policy of encouragement appropriately to avoid the pitfalls of throwing the baby with the bath water, there can not be a turnaround from the avowed policy of gradual liberalization, including the cap ital account. All modern market economies have evolved policies to reconcile prudent monetary management with the benefits of a liberal capital account. There is no scope for any diffidence in India also moving in the same direction.
CONCLUSION
The liberalization policies had the desired expansionary effect and had either increased the mean level of FII inflows and/or the sensitivity of these flows to a change in BSE returns and /or the inertia of these flows. On the other hand, the restrictive measures aimed at achieving greater control over FII flows also did not show any significant negative impact on the net inflows, it had found that these policies mostly render FII investment sensitive to the domestic market returns and raise the inertia of the FII flows.
Foreign institutional investors had emerged as the most dominant investor group in the domestic stock market in India. Particularly, in the companies that constitute the Bombay stock market sensitivity index, their level of control was very high. Data on shareholding pattern showed that the FIIs were currently the most dominant non-promoter shareholder in most of the sensex companies and they also controlled more tradable shares of sensex companies than any other investor groups .The sensex, market capitalization of NSE, Turnover of BSE and NIFTY without market capitalizations were influenced by Foreign Institutional Investors. FIIs investment was not across the shares listed in the stock exchange but instead it was very concentrated on the top few company’s shares. Though there was a role by FII on Indian stock market. It was to be taken very cautiously because their influences were on the very few shares in the stock market, which influenced the indicator included in the study but which might not help the Indian economy to grow
The influence of FIIs on the movement of sensex became apparent after general election in India, during this period sensex experienced its worst single-day decline in its history and in the three month period between April to June 2004, it declined by about 17 percent. Moreover, this study also showed that even sharp changes in sensex did not necessarily indicted a significant alteration of actual shareholding pattern of different investor groups even in sensex companies. The activities of foreign institutional investors in emerging economies following the opening-up of the capital account were not simply positive for these countries but could also exert adverse effects. The reasons were derived from asymmetric distributions of information between local and foreign investors and between fund holders and mangers. Foreign institutional investors could be assumed to have relatively little information on specific developments in emerging markets so that ‘diluted information’ and ‘illusive competition’ could result. Their influence on these markets was likely to worsen the relative position of local investors which leads to ‘unbalanced diversification’. Moreover, due to their incentives they were likely to amplify occurring imbalances or even trigger financial shocks leading to what they call ‘obscure risks’ and ‘booming contagion’. The was long run relationship between net FII investment and sensex, FII investment did not respond the short-run changes or technical-position of the market and they were more driven by fundamentals, and FII investments did granger cause India stock market. The FIIs investments are highly concentrate in terms of their market value in very small number of companies. There seemed to be a clear distinction in the FIIs shareholding in nifty and non-nifty companies. There was a wide gap between the actual investments by FIIs and the investments allowed as per the cap.The gap in their investments existed both in nifty and non-nifty companies
REFERENCES
1 “Parthapratim pal” in 2006, he conducted study on “Foreign Portfolio Investment, Stock market and Economic Development: A case study of India”,
2 “Selen Serisoy Guerin” in 2006, conducted study on “The Role of Geography in Financial and Economic Integration: A comparative Analysis of foreign direct investment, Trade and Portfolio Investment Flows”
3 Keneeth A. Froot and Tarun Ramadorai in 2005, they conducted study on “The information content of international portfolio flows”,
4 A.Julia Priya, D. Lazar and Joseph Jeyapual in 2005, they conducted study on “Role of Foreign Institutional Investors on stock market development in India”,
5 Keneeth A. Froot and Tarun Ramadorai in 2005, they conducted study on “Currency Returns, Intrinsic value, and Institutional-Investor flows”,
6 Megumi Suto and Masashi Toshino in 2005, they conducted a study entitled as “Behavioral Biases of Japanese Institutional Investors: fund management and corporate governance”
7 “Suchismita Bose and Dipankor coondoo” in 2004, they conducted study on “The Impact of FII Regulation in India”,
8 Lakshmi sharma in 2004, he studied, “A Gap Analysis of FIIs Investment-An estimation of FIIs investment Avenues in Indian Equity Market.
9 Parthapratim pal in 2004 conducted study entitled as “Recent volatility in stock markets in India and foreign institutional investors.
10 “Michael Frenkel and Lukas Menkhoff” in 2004, they conducted study on “Are Foreign Institutional Investor Good for Emerging Markets?”,
11 “Brian Bushee” in 2004, he conducted study on “Identifying and attracting the “right” investors: evidence on the behavior of Institutional investors”,
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13 Gayathri Devi .R in 2003, she conducted study on “Causal Relationship between FIIs and Stock Market: A critical study”
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17 J.S. Pasricha and Umesh.C.Singh in 2001, tried to analyze the impact of FIIs investment on Indian capital market.
18 S.S.S. Kumar in 2001, attempted in his study to find the effect of FIIs on the Indian stock market.
19 “Rajesh chakrabarti” in 2000 conducted study on “FII Flows to India: Nature and Causes”
20 C.H. Rajeswar in 2000, he conducted study entitled “Foreign Institutional Investors – A new force of support and discipline”
21 As per K. Seethapathi and V. Subbulakshmi study entitled “Foreign investment: Need for focus”,
22 Ila Patnik and Deepa Vasudevan in 1998, their study entitled “foreign portfolio investment to India
23 “Rene M. Stulz” in 1999, he analyzed study on “international portfolio flows and security markets”.
24 Yung Chul Park and Chi-Young Song, they conducted study on “Institutional Investors, Trade linkage, Macroeconomic similarities and contagious Thai crisis
December 5th, 2009
posted in Investment News
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