So You Want To Be A Shark?
For those of us who enjoy the CNBC show Shark Tank, the thrill comes from imagining ourselves as one of the Sharks sitting in the driver's seat, listening to business pitch after pitch, negotiating take it or leave it deal terms, or declining to invest in the deal completely. It has been these scenarios that is what has made my juices flow during my past 20 years working in finance.
Mutual funds are great traditional products that should be a significant part of everyone’s saving and retirement portfolio. However it is becoming increasing apparent that for many, it’s just not enough. More individuals are looking for that higher risk and reward investment opportunity.
Here are 5 categories of investments readily available to you along with resources to save you some time and help you grow that shark fin. All of these can help you diversify your investment portfolio as well as move up the risk-reward scale. In no particular order:
1. Real Estate
This is probably the most widely known and thought-of side investment. Buy a property, renovate it, then rent it or sell it - repeat. Here is a local resource worth checking out: The Realty Investment Club of Houston - www.richclub.org . If you are new to real estate investing, I can't recommend enough attending one of their monthly Saturday general body meetings. It is a terrific source of information and contacts. Bring a family member. Bring a friend. No doubt you'll be impressed.
2. Individual Stocks and Stock Options
While mutual funds invest in stocks for you, what most do not realize is that the average mutual fund invests in about 150 different stocks at any given time. So you are rarely benefiting from the performance of just a few companies. If you want to increase your risk-reward payoff then investing in individual stocks is a way to go. And for those that want a bit of Las Vegas style payoff in their investments, learning about stock options is the next step.
Two great resources for the do-it-yourself type: (1) Better Investing,www.betterinvesting.org , a nonprofit organization providing online stock analysis tools and a magazine subscription and (2) Value Line,www.valueline.com, a stock research company and Warren Buffett favorite.
If you want some professional guidance, consider hiring a managed account money manager. Managed accounts are gaining popularity. They provide greater control, options, and transparency than mutual funds.
3. Conventional Businesses (Franchise & Other)
What's great about a franchise business is that you can walk in to a standardized approach of running a particular business, removing a lot of guess work. That is by no means a guaranteed route to success, but helps nonetheless. This webpage provides a great overview video about how to quickly investigate a franchise’s record of success, typical costs, and other resources: http://www.ecodevel.com/franchising/ .
Another resource unknown to many when it comes to finding non-franchise businesses is the website BizBuySell: http://www.bizbuysell.com/ . This website allows you to screen for businesses for sale by location, business type, and purchase price.
4. Futures (Commodities, Foreign Exchange)
Most that invest in these opportunities are very active investors or traders. In other words, people who make these investments do so during market trading hours. If this is an area of interest, I recommend hiring someone to do the investing for you. You can go to the following website to find firms that specialize in making these investments for their clients: http://www.theniba.com/ . Screen their directory for Commodity Trading Advisors (CTAs).
5. Crowdfunding Investments
We all have heard about artistic and goodwill projects that have been crowdfunded. In most cases so far, people give the developer of these projects money, and the developers in turn give the contributor/donor something in return, say tickets, t-shirt, special access, etc. The point to drive home is that in most cases today, the people who give these monies are DONORS – not investors.
However, the Obama Administration, through the JOBS Act, is working to make it easier for entrepreneurs to market to strangers for money. These changes would allow middle income wage earners to readily take part in the American "Shark Tank" Dream. Today, beyond the people entrepreneurs personally know, they can only approach “accredited investors” with their deals. Accredited investors are defined as those earning $200,000+ per year or have a net worth of $1 million or more excluding their primary residence. If you happen to be an accredited investor you can consider a subscription to this deal website called Crowdwatch (www.crowdwatch.co, not .com). The bottom line, as a higher risk-reward investment route, crowdfunding is not fully ready for prime time, but it is getting there.
Well if you’re looking to sit in that Shark chair now or sometime soon, you now have some resources for getting started. Happy hunting and good luck!
G. Mathis Conner is the Founder and Chief Investment Officer of Conner Management Group, LLC, a managed account money manager. He welcomes your finance and investment related questions at firstname.lastname@example.org . Get to know the firm by visiting their website: www.connermg.com and subscribing to their newsletter.