Investment Archives - Flaherty Solutions

Bigger Organization With Mutual Funds

fadmin — Wed, 27 Jan 2016 14:09:49 +0000

A mutual fund is a professionally managed investment fund that pools money from many investors to purchase securities. While there is no legal definition of the term “mutual fund”, it is most commonly applied only to those collective investment vehicles that are regulated and sold to the general public. They are sometimes referred to as “investment companies” or “registered investment companies”. Hedge funds are not mutual funds, primarily because they cannot be sold to the general public.

In the United States, mutual funds must be registered with the U.S. Securities and Exchange Commission, overseen by a board of directors or board of trustees, and managed by a Registered Investment Advisor. Mutual funds are subject to an extensive and detailed regulatory regime set forth in Investment Company Act of 1940. Mutual funds are not taxed on their income and profits if they comply with certain requirements under the U.S. Internal Revenue Code.

Mutual funds have both advantages and disadvantages compared to direct investing in individual securities. Today they play an important role in household finances, most notably in retirement planning.

There are three types of U.S. mutual funds—open-end funds, unit investment trusts, and closed-end funds. The most common type, open-end funds, must be willing to buy back shares from investors every business day. Exchange-traded funds (ETFs) are open-end funds or unit investment trusts that trade on an exchange. Non-exchange-traded open-end funds are most common, but ETFs have been gaining in popularity.

Mutual funds are generally classified by their principal investments. The four main categories of funds are money market funds, bond or fixed income funds, stock or equity funds, and hybrid funds. Funds may also be categorized as index (or passively managed) or actively managed.

Investors in a mutual fund pay the fund’s expenses, which reduce the fund’s returns and performance. There is controversy about the level of these expenses.

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Real Estate Investments

fadmin — Sun, 27 Dec 2015 14:14:55 +0000

Real estate markets in most countries are not as organized or efficient as markets for other, more liquid investment instruments. Individual properties are unique to themselves and not directly interchangeable, which presents a major challenge to an investor seeking to evaluate prices and investment opportunities. For this reason, locating properties in which to invest can involve substantial work and competition among investors to purchase individual properties may be highly variable depending on knowledge of availability. Information asymmetries are commonplace in real estate markets. This increases transactional risk, but also provides many opportunities for investors to obtain properties at bargain prices. Real estate entrepreneurs typically use a variety of appraisal techniques to determine the value of properties prior to purchase.

Typical sources of investment properties include:

Market listings (through a Multiple Listing Service or Commercial Information Exchange)
Real estate agents and Real estate brokers
Banks (such as bank real estate owned departments for REO’s and short sales)
Government entities (such as Fannie Mae, Freddie Mac and other government agencies)
Public auction (foreclosure sales, estate sales, etc.)
Private sales (transactions for sale by owner For sale by owner)
Real estate wholesalers and investors (flipping)

Once an investment property has been located, and preliminary due diligence (investigation and verification of the condition and status of the property) completed, the investor will have to negotiate a sale price and sale terms with the seller, then execute a contract for sale. Most investors employ real estate agents and real estate attorneys to assist with the acquisition process, as it can be quite complex and improperly executed transactions can be very costly. During the acquisition of a property, an investor will typically make a formal offer to buy including payment of “earnest money” to the seller at the start of negotiation to reserve the investor’s rights to complete the transaction if price and terms can be satisfactorily negotiated. This earnest money may or may not be refundable, and is considered to be a signal of the seriousness of the investor’s intent to purchase. The terms of the offer will also usually include a number of contingencies which allow the investor time to complete due diligence, inspect the property and obtain financing among other requirements prior to final purchase. Within the contingency period, the investor usually has the right to rescind the offer with no penalty and obtain a refund of earnest money deposits. Once contingencies have expired, rescinding the offer will usually require forfeiture of the earnest money deposits and may involve other penalties as well.

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Oil Price Fluctuations

fadmin — Sun, 27 Sep 2015 14:19:18 +0000

The price of oil, or the oil price, generally refers to the spot price of a barrel of benchmark crude oil—a reference price for buyers and sellers of crude oil such as West Texas Intermediate (WTI), Brent ICE, Dubai Crude, OPEC Reference Basket, Tapis Crude, Bonny Light, Urals oil, Isthmus and Western Canadian Select (WCS). There is a differential in the price of a barrel of oil based on its grade—determined by factors such as its specific gravity or API and its sulphur content—and its location—for example, its proximity to tidewater and/or refineries. Heavier, sour crude oils lacking in tidewater access—such as Western Canadian Select— are less expensive than lighter, sweeter oil—such as WTI.

From 1999 til mid 2008, the price of oil rose significantly. It was explained by the rising oil demand in countries like China and India. In the middle of the financial crisis of 2007–2008, the price of oil underwent a significant decrease after the record peak of US$145 it reached in July 2008. On December 23, 2008, WTI crude oil spot price fell to US$30.28 a barrel, the lowest since the financial crisis of 2007–2010 began. The price sharply rebounded after the crisis and rose to US$82 a barrel in 2009. In July 2008 oil reached a record peak of US$145 but by February 2009 it sank beneath $40 a barrel. On 31 January 2011, the Brent price hit $100 a barrel for the first time since October 2008, on concerns about the political unrest in Egypt. For about three and half years the price largely remained in the $90–$120 range. In the middle of 2014, price started declining due to a significant increase in oil production in USA, and declining demand in the emerging countries. The oil glut—caused by multiple factors—spurred a sharp downward spiral in the price of oil that continued through February 2016. By February 3, 2016 oil was below $30— a drop of “almost 75 percent since mid-2014 as competing producers pumped 1-2 million barrels of crude daily exceeding demand, just as China’s economy hit lowest growth in a generation.” Some analysts speculate that it may continue to drop further, perhaps as low as $18

According to a report released on February 15, 2016 by Deloitte LLP—the audit and consulting firm—with global crude oil at near ten-year low prices, 35% of listed E&P oil and gas companies are at a high risk of bankruptcy worldwide. Indeed, bankruptcies “in the oil and gas industry could surpass levels seen in the Great Recession.”

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