The Bull Hunters Guide

Last week in the investment series, we were on the subject of unit investment trusts, however, this is the end of the road as far as our alternative investment series goes. This is the last type of alternative investment strategies we’ll be looking at!

We’re going to end today by looking at one particular type of security that is popular because of its safety and predictability – the Zero Coupon Security.

Zero Coupon Securities - Safe And Predictable

Often referred to as a stripped bond, the zero coupon security is, as the name suggests, a bond that has had the regular paying coupons removed. Essentially, regular bonds are “zeroed out”, and then these zeroed out bonds are traded as their own individual securities.

Think of it this way, a bond is already split into two parts – the principal, and the interest, or “coupons”. When a Zero Coupon Security is sold, it’s essentially just the various coupons on a bond being bundled together with that bond’s residual and then sold as its own unit.

The reason this is a secure investment strategy is because you’re essentially paying a certain amount in exchange for the security of receiving a certain amount at a later date. In other words, like a bond or treasury bill, you know up front what you’ll be getting at the maturity date, which makes this a great investment type for those who like to play it safe.

The one risk with a Zero Coupon Security, however, is that the accruing interest is considered income. This means that while you won’t receive a pay out until maturity, you’ll have to pay income tax every year of the life of the security, on whatever interest it happens to gain.

We hope you have enjoyed this 18 part series on alternative investments, we will see you next week for a new 7 part series, where we look at some of the worst and most common mistakes that people make when dealing with stocks.

Sean Rasmussen
The Bullhunters Guide
Universal Wealth Creation © 2004 - 2009

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If you missed last weeks post in the investment series, don’t forget to check it out, there was some great information you may find useful about investing with treasuries.

Stock market investing has an appeal for many people because of its ability to generate a lot of capital quickly provided that one knows how to pick the right stocks in a pinch. However, what about those people who just want to invest their money and save it for the long term?

There are mutual funds to be sure, but even these require a commitment to managing the underlying securities and paying attention to the market overall. Is there any type of lucrative hands-off approach to investing? There certainly is…

What Is A Unit Investment Trust?

Unit Investment Trusts, also known as UITs are the answer for many people. When one invests in a UIT, one is investing in a portfolio made up of lots of different kinds of securities, which is then held for a fixed period of time until the point of maturity.

The securities that make up a Unit Investment Trust can vary widely, from municipal bonds to corporate bonds, and even common stock. In the event that common stock is part of a UIT, however, it will typically be of the dividend producing variety to ensure at least some pay off.

UITs are very popular among those who want to generate a continuous and steady stream of income without worrying about “watching the market” or having to choose that one investment that will pay off big.

The only real drawback to this is that, because of the long maturity rate of these investments, and the fact that the portfolio’s interest rate is fixed, it’s possible for a UIT to be overwhelmed by inflation. In other words, the cost of living is bound to rise at least some, while the interest rate on your Unit Investment Trust will remain the same as when you purchased it. On the other hand, the certainty of payout can more than make up for this, if you go in knowing what you’re dealing with.

See you next week for part 18 of Investments.

Sean Rasmussen
The Bullhunters Guide
Universal Wealth Creation © 2004 - 2009

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I hope you had a chance to read last weeks edition of the investment series, where we touched on an investment strategy called REIT, which stands for real estate investment trusts. In this entry, we’re going to discuss the treasuries.

Most people know about bonds as a form of investing in federal capital and gains. However, there is another similar commodity that many stand to benefit from which is not as frequently advertised.

What Is Investing In Treasuries?

Investing in treasuries is also known as investing in government securities, and that’s exactly what it is. Most national governments owe a debt of some sort. Investing in that obligation is essentially loaning money to the government on the assurance that it will be paid back with interest. It’s as simple as that, and considered to be extraordinarily safe because of the credit power backing the loan.

There are many different ways to invest in Treasuries, depending on the length of time you want your investment to mature.

There are Treasury Bills, which tend to mature in under one year. They don’t pay a fixed interest rate usually, but they do tend to be sold at something of a discount. Overall, a fairly attractive option.

Treasury Notes, on the other hand, do offer a fixed interest rate. The trade off for this is that they tend to mature over a much longer time: one to ten years.

Treasury Bonds, the longest term investment of all at more than ten years, are a fixed interest security as well and tend to enjoy much growth.

A Safe Investment Strategy

Of all the investment methods we’ve covered, this is widely considered to be one of the safest by far. The only thing that could prevent the payoff of a treasury investment would be the total and complete collapse and dissolution of the government involved. For this reason, it’s often a popular place to put money whenever the market itself is looking bad, especially if you get a fixed interest rate.

Just keep in mind that the price of Treasuries fluctuate with the federal interest rate, so for wealth creation, it’s best to buy when rates are high.

See you next week for part 17 of Investing.

Sean Rasmussen
The Bullhunters Guide
Universal Wealth Creation © 2004 - 2009

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Last time around, we talked about the usefulness of real estate as an alternative Investment opportunity. While the advantages of real estate are manifold, it’s certainly not for everybody. Why is that? Simply put, it’s expensive!

However, there is an option for those people who want to become involved in the real estate market but who don’t have the cash on hand or the credit needed to purchase a home or any other piece of property. The answer is Real Estate Investment Trusts, or REITs.

Types Of REIT To Consider

REITs are a commodity sold on the open market, much like stocks, except you’re Investment in real estate properties instead of in companies. The value of the REIT will usually vary and will depend upon the real market value of the property in question. There are three types of REITs to consider.

Equity REITS are associated directly with properties that are owned. There is, then, a responsibility for the upkeep and value of those properties. The revenue generated for the REIT in this case will come from the rents paid on the associated properties.

The second type of REIT is the mortgage REIT which should be thought of more as a loan instead of an outright purchase. In other words, this type of REIT loans out money to be used for mortgages for property owners. The revenue from them comes mostly from the interest that is owed on the payback of these loans.

Lastly, there’s the hybrid REIT, which as the name suggests, is a useful combination of the two. It invests in both properties and mortgages in an attempt to diversify where the revenue comes from.

REIT Investment Risks

The only real risk associated with a REIT lies with the state of the real estate market in general. If the market is performing well, a REIT will be a valuable Investment to hold. Otherwise, it will not experience much growth. In this sense, it operates very much like a trust fund, and is just as safe.

See you next week for part 16 of Investments.

Sean Rasmussen
The Bullhunters Guide
Universal Wealth Creation © 2004 - 2009

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In last weeks edition of the Investment series, we covered investing in preferred stock. Time for something a little different this week, an Investment strategy that most people get involved in sometime throughout their lives - borrowing to buy real estate.

Generally speaking, most people think of loans as debt. They also think of debt as a universally bad thing. This, however, isn’t such a black and white issue.

It’s true that debt sunk into disposable goods like televisions or other luxury items is bad debt, debt that’s put towards goods that will increase in value is considered good debt, the same as any other investment. One of the most common forms of “good debt” that people hold is real estate.

A Worthwhile Investment

When you get ready to buy a home, you must learn to think of it as the Investment that it really is. Of course, you’re going to get a lot of personal use out of your home, but at the same time, if you put the right effort into upkeep and maintaining your home, you will eventually be able to sell it for more than you bought it for – a worthwhile investment.

But real estate Investment doesn’t stop at one’s personal home. There are many other ways that real estate can serve you. For instance, you could purchase a commercial property. Any businesses wanting to operate there would then have to pay you rent. The same is true for apartment buildings or condominiums, collecting monthly rent can be a great way to supplement your income and save for the future.

What Type Of Property Do I Invest In?

What kind of real estate you should think about investing in really depends on what you’re looking to get out of it. If you’re looking for a long term investment, then buying a good piece of land or real estate in a nice neighbourhood will pay off that way. You can eventually sell it for a nice sum. If you’re looking more for an immediate payoff that can serve as income, buying a rental property is an excellent route to take.

Bear in mind, however that real estate carries its own risks and caveats. Make sure you’re intimately familiar with the cost of buying property in your area, as well as recurring expenses such as maintenance and taxes.

See you next week for part 15 of Investments.

Sean Rasmussen
The Bullhunters Guide
Universal Wealth Creation © 2004 - 2009

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