Alternative Investing In A Peculiar And Unstable Market

Posted on March 21, 2010
Filed Under Commodities Futures | Leave a Comment

When guys get together anywhere, there is eternally some sport to speak about, but then there is forever time to run through what investment escapades one or the other have been through of late. Nobody is really kind to their money managers in these conversations either; but what are those poor managers to do? It’s a difficult market for them – and they don’t get a set fee for their services; they work on a 1% commission. They really would not be standing by watching your assets take a dive if they could help it; their paychecks are taking a dive too. And they’re so sick of seeing their incomes vanish month after month, they’re looking to new ways to invest wealth, to bring their salaries up to speed. New, unorthodox ways.

Mostly, money managers are not so happy with the traditional philosophy, that investment in stocks is the best way onward. If you would read any professional investments magazine for the people who supervise your money, alternative investments is something they can’t stop talking about. What exactly is ‘unorthodox’ as they mean though? They just mean investments that are not tied to the stock indexes and the treasury bonds. They are considering directing their customers to ways to invest money like buying up farmland, investing in managed commodity futures funds, and different unrestrained mutual funds. So what is all this business with the farmland?

Farmland investment has been relatively trendy for a while. Obviously, you do need a certain minimum investment to get into this, usually about $120,000. You can buy a dozen acres of farmland, lease it out to those who till the land, and collect your $3000 royalty check yearly. And given that land is always in demand, you could forever sell it to get your money back, and then some. Why, in the last 15 years, land prices around the corn belt have risen approximately 7% yearly. But land prices do fall, and there is no real guarantee. In Iowa, land prices frequently lose about half their value once every 5 years or so, and rise up to gain a quarter in the subsequent years. But there is a certain fulfillment involved in making your money tilling the land, even if by remote control.

Managed commodity-futures funds offer some really good ways to invest money. And they’re pretty unique too. What they do is they obtain a calls option on what they think is going to be hot in coming years, livestock, grain, or anything. And they hope that that product comes to be in demand. It doesn’t take much money to gamble on the future in this way, and so many people could crowd near this soon. Investors seem to be making a lot of money this year on this kind of investment. You don’t go to an ordinary stockbroker, you go to a commodities trading advisor for this. Your broker or advisor will charge something like a fifth of whatever you make. These used to be just for the large investors until of late. But hedge fund sponsors are now bringing the market to you and me. You may get in with $8000.

It could really be time to get out there and discover new ways to invest money; the customary avenues haven’t in fact been very kind to us lately.

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