Investors generally fall into three categories: those who want big and fast returns, those who want slow and consistent returns and those who want both. In the world of investing you can typically find investments that will service the first two types of investors, but finding one to service the third may just not be possible. Let’s take a look at one slow and steady investment, and one that can offer fast and big returns, and for that third group there is always the option to invest in both.
Commercial Real Estate
Commercial real estate investing has made more millionaires in the US than any other type of investment and has proven to provide the best return over time of any investment you can make. But these investments usually mature over years and even decades. So the real estate investor needs to be patient and steady. Savvy commercial real estate investors like Joe Johnson Welfont know that deliberate, methodical investing techniques have provided the vast wealth that many commercial investors boast today.
One of the best benefits about commercial real estate investing that the investor can see his investment in a tangible asset. Unlike stocks, there is a physical place the investor owns. This provides a sense of control for real estate investors.
With commercial real estate it also is easy to quantify your expenses liabilities, assets and incomes, to plot a path to profitability. Finding out real information about a property is easy compared to many investments (particularly stocks), and this can be used to get loans, leverage and plan. Since commercial real estate investing has been around for so long, there is a well-worn approach to generate you more money.
Hedge Funds are at the other extreme of investing and use extremely complicated investing methods to generate returns for their clients. They are managed by self-governed fund managers and often operate right on the edge of what is legal, but their returns and promise of returns attracts even the most mainstream investors. If you do your research, you will find that a hedge fund’s returns will typically differ greatly from that of the general market because they only focus on large immediate returns whereas the overall market looks for long term steadier returns. Hedge funds invest in different classes of assets and place a considerable part of their capital in derivatives that are used for risk management and generating additional profits.
When you invest in a hedge fund you must be comfortable with some often counterintuitive factors. They include: turning your investment choices over to someone who might be a prima donna, and committing to a 3 year investment term before you can withdraw your money. And with a lack of regulation, there is no one looking over their shoulder to ensure things do not get out of hand.
Investors join hedge funds for one overwhelming reason, some have been able to create huge profits, which then get split with investors. The downside is that unlike with mutual funds, hedge fund managers take up to 25% of the profits.
Hedge funds attract higher end investors because there are prohibited from soliciting funds from investors with less that $1 million net worth. But their largest group of investors are institutional. They also get money from pension and sovereign funds even these two are the most conservative groups around.
These two nearly opposite investment types appeal to two different type of investor. Both has its benefits and which one is best depends on your style of investing. Or as stated earlier, you can always invest in both.