A Journey into Alternative Investments: From Real Estate to Loan Notes
As a professional engineer with an MBA and over 15 years of experience in various facets of business management, finance, and strategy, my investment journey has been marked by a desire for diversification and a penchant for fact-based decision-making. In this article, I'll share my experience, primarily over the last three years, as I delved into alternative investments, particularly in the realm of loan notes.
The Early Days: Equities, Real Estate, and Rental Income
When I first started out, I began my investment journey by building a diversified portfolio that included equities. With monthly contributions, I gradually accumulated Exchange-Traded Funds (ETFs), reflecting my preference for a steady, long-term approach. This foundation allowed me to have a foothold in the equities market while I explored other avenues. As my understanding of company valuation and value investing grew, my portfolio gradually shifted from ETFs toward a more focused selection of individual shares.
When I first embarked on my investment journey, my secondary focus was on real estate. The allure of rental income and the potential for capital appreciation were hard to resist. Having a solid background in surveying and geomatics, I felt a strong connection to the tangible nature of real estate assets.
I began by meticulously researching local real estate markets, attending property investment seminars, and establishing connections with experienced real estate investors. This careful groundwork allowed me to make informed investment decisions.
The Evolution: A Shift to Alternative Investments
Over the last three years, I've taken a leap into the world of so-called "alternative investments," understanding that this term encompasses any investment outside the mainstream. Real estate itself falls under this category. I've invested in five different companies to date, each offering unique loan note opportunities. These companies represent diverse sectors, from litigation funding to luxury accommodation, precious metal mining, and even precious stone and jewelry companies. Additionally, I've invested in a company that deals with sourcing and distributing gold.
One of the best aspects of these structured investments for me is that I know upfront what to expect. Each investment is for a fixed term, providing me with regular fixed income. The income that I've been receiving from these investments ranges between an impressive 10% and 18%, depending on the offering. These returns have been paid out either quarterly, bi-annually, or annually, depending on the specific terms of each investment.
Mitigating Risk and Enjoying Stability
What sets these investments apart is their relative stability. While they are not entirely devoid of market risks, the underlying value of my investment is not affected. I don't feel the volatility of global fluctuations often witnessed in the equities market.
Another great benefit of debt investment is that my capital is secured against the assets or the company, much like a bank's mortgage against your home. Creditors, such as myself in these cases, have a stronger claim against the company's assets in the event of bankruptcy compared to shareholders.
Moreover, these investments come with the added benefit of a fixed investment term. While there's no secondary market for these investments, meaning you can't easily exit in a squeeze, this feature provides security that your capital is locked in and won't depreciate during the term of your investment. A shorter term, such as a year, allows me to reassess periodically if I wish to reinvest with the same company or move my capital elsewhere.
As any entrepreneur will know, well-run businesses tend to operate well into the future, despite market ups and downs. In contrast, listed stocks in the equities market are susceptible to the unpredictable sway of daily news, making it hard to anticipate how it will affect the value of your underlying investment.
In conclusion, my journey into alternative investments, specifically loan notes, has added a layer of diversification and stability to my investment portfolio. It's allowed me to secure my capital and enjoy regular income with returns ranging from 10% to 18%, paid out either quarterly, bi-annually, or annually, depending on the offering. This strategy provides both steady income and a shield against the ups and downs of the equities market, all within the framework of fixed investment terms.
As an individual who values facts over feelings, this journey has been a testament to the benefits of a well-researched, diversified, and adaptable investment approach. I'm excited to see how the future unfolds and remain open to exploring further opportunities as long as they align with my strategy and provide a solid foundation for success.
P.S. I am not a financial advisor nor am I aspiring to be one. I just wanted to share my experiences thus far.