I've always been interested in Angel Investing and helping to fund startup companies that have potential to become the next big thing. Up until recently, participation in the venture capital field has been limited to accredited investors with at least $1 million in assets and/or $200,000 per year in income. Now, thanks to the miracle of the internet, there is hope for smaller investors who want to get involved in the game of early-stage funding. A relatively new website called MicroVentures is revolutionizing the way startups raise funds by leveling the playing field of startup investing. To date the site has raised over $40 million for various startup ventures.
MicroVentures opens the door for accredited and non-accredited investors to invest in startups. Investors can get in on opportunities for as little as $1,000 per deal. Most of the available startup opportunities ask for a $5000 minimum investment, but it is possible to request a smaller amount. Most of the startups offered are in up and coming technology companies that are doing something unique in their field. All companies have been thoroughly investigated and analyzed by MicroVentures team members, but due diligence is still recommended on the part of individual investors.
I recently made an investment in an investing fund that works a little like a mutual fund. The fund, run by MicroVentures, invests in many or all available companies funded by MV. It was a great way to diversify the investment and spread risk across multiple startups. The funding round for the fund closed at the end of last month, but they may offer additional rounds in the future.
One downside of the site is that it can sometimes take a while for a round to receive funding. So, if you make an investment at the beginning of the funding period, your money could be held up for an undetermined amount of time, until the funding round is completed. Fortunately, site staff send out warning emails to let investors know when funding rounds are getting close to funding so that investors can get in at the right moment without the opportunity costs of having to hold cash in limbo on the sidelines. Another thing to keep in mind is that this kind of investment is very speculative. Your investment buys a small piece of an actual company, but the investment is highly illiquid. To get money out, you will have to wait for a liquidity event such as a stock offering, or a buyout of the company. You should expect this to be a longer term investment of at least 3 to 5 years.
In closing, if you like kickstarter, you will love MicroVentures. MicroVentures is like kickstarter for grownups who want more than a new toy in return for their investment. Go there and check it out today! https://microventures.com/
Monday, October 6, 2014
Wednesday, October 1, 2014
LendingClub-My experiment in using other people's money.
“Again, it will be like a man going on a journey, who called his servants and entrusted his wealth to them. To one he gave five bags of gold, to another two bags, and to another one bag, each according to his ability. Then he went on his journey. The man who had received five bags of gold went at once and put his money to work and gained five bags more. So also, the one with two bags of gold gained two more. But the man who had received one bag went off, dug a hole in the ground and hid his master’s money. Matthew 25:14-30New International Version (NIV)
In the parable above, the master commends the servants who gave him a return on his money. The servant who hoarded the master's cash was called worthless and condemned to outer darkness because of his unfaithfulness with what was entrusted to him.
Using other people's money to make money is older than Biblical history. In fact it is probably as old as all written history because before the invention of money there was no pressing reason to record anything in writing. Most things could just be passed down by word of mouth and stories. The invention of money brought with it the necessity for the creation of contracts to record transfers of wealth and ownership. Some of the oldest surviving examples of written words were part of legal documents.
In present times, there are still many ways to invest using other people's money to make money for yourself. One way I have been experimenting with lately is called interest rate arbitrage, using a peer to peer lending site called Lending Club. Lending Club allows investors or speculators to purchase part or whole interest in unsecured loans contracted by Lending Club.
Anyone who meets Lending Club's requirements can purchase notes on the site. Some states do not allow residents to purchase notes in the primary market, but interested parties can make purchases on the secondary market offered by foliofn.
I have made most of my note purchases through the secondary market because I am looking for loans with shorter terms than the standard 36 or 60 month varieties offered in the primary market. I choose shorter loan repayment periods for the obvious reason that I will get the money back faster. Shorter loans also tend to be safer because they have completed a greater number of payments to date. Lending Club's own internal statistics show that a loan is more likely to default between the first and tenth payment, so loans which have amortized more than 10 months will tend to be safer. Additionally, for the method I describe in the next paragraph, I have to look for shorter term loans so that monthly payments will match more closely to necessary monthly withdrawals. Also, I just like getting the money back out as soon as possible.
Currently, I am experimenting with interest rate arbitrage using zero percent balance transfer offers from some of my currently established credit cards. I now have accepted two offers. One offer is for 18 months and the other is for 24 months, both offer zero percent for the entire term. One thing to be aware of if you try this is the fee for using the service which is 4 to 5 percent of the entire amount you request. Be sure to factor that in up front. Also, don't do what I did and take out your entire credit limit on each card because it can affect your credit rating and possibly prevent you from getting more zero percent offers until you pay down your high balances. I am planning to pay off the entire loan amount by the end of the term, before any interest comes due. Alternatively, it would be possible to transfer balances to other zero percent cards before the zero percent offer expires, but only if you are willing to pay another balance transfer fee. I am planning to pay off the balances monthly payments based on amortization schedules that I calculated on bankrate.com. At the end of the loan periods I should have a positive return on investment that was made using none of my own money.
Using other people's money to make money is older than Biblical history. In fact it is probably as old as all written history because before the invention of money there was no pressing reason to record anything in writing. Most things could just be passed down by word of mouth and stories. The invention of money brought with it the necessity for the creation of contracts to record transfers of wealth and ownership. Some of the oldest surviving examples of written words were part of legal documents.
In present times, there are still many ways to invest using other people's money to make money for yourself. One way I have been experimenting with lately is called interest rate arbitrage, using a peer to peer lending site called Lending Club. Lending Club allows investors or speculators to purchase part or whole interest in unsecured loans contracted by Lending Club.
Anyone who meets Lending Club's requirements can purchase notes on the site. Some states do not allow residents to purchase notes in the primary market, but interested parties can make purchases on the secondary market offered by foliofn.
I have made most of my note purchases through the secondary market because I am looking for loans with shorter terms than the standard 36 or 60 month varieties offered in the primary market. I choose shorter loan repayment periods for the obvious reason that I will get the money back faster. Shorter loans also tend to be safer because they have completed a greater number of payments to date. Lending Club's own internal statistics show that a loan is more likely to default between the first and tenth payment, so loans which have amortized more than 10 months will tend to be safer. Additionally, for the method I describe in the next paragraph, I have to look for shorter term loans so that monthly payments will match more closely to necessary monthly withdrawals. Also, I just like getting the money back out as soon as possible.
Currently, I am experimenting with interest rate arbitrage using zero percent balance transfer offers from some of my currently established credit cards. I now have accepted two offers. One offer is for 18 months and the other is for 24 months, both offer zero percent for the entire term. One thing to be aware of if you try this is the fee for using the service which is 4 to 5 percent of the entire amount you request. Be sure to factor that in up front. Also, don't do what I did and take out your entire credit limit on each card because it can affect your credit rating and possibly prevent you from getting more zero percent offers until you pay down your high balances. I am planning to pay off the entire loan amount by the end of the term, before any interest comes due. Alternatively, it would be possible to transfer balances to other zero percent cards before the zero percent offer expires, but only if you are willing to pay another balance transfer fee. I am planning to pay off the balances monthly payments based on amortization schedules that I calculated on bankrate.com. At the end of the loan periods I should have a positive return on investment that was made using none of my own money.
Tuesday, September 30, 2014
Is MLM a four letter word?
There are only three letters in MLM, but when you speak the words "Multi-Level Marketing" to some people, you may notice them begin to slowly back away from you as if you were emitting a foul odor.
I have heard mixed reviews about MLM, or "Network marketing" plans, but I also know people who have been very successful in it. When I recently contacted LegalShield to inquire about becoming an associate, the representative I talked with emphasized that I was becoming involved in a "home-based business," and never mentioned the words multi-level marketing, or network marketing.
I began seeking out opportunities in MLM companies because I was looking for opportunities to own my own business with the goal of financial freedom. MLM companies give the opportunity to be part of an established business system that others have been successful in. I discovered LegalShield on a nexera.com list of Top 25 Network Marketing Companies in the World.
What attracted me to LegalShield was its 40 years in business and the fact that associates are not required to buy and hold inventory. I have a one car garage and I can truthfully say that my car has never seen the inside of it because it is packed from floor to ceiling with no space in between for boxes of vitamin supplements from a marketing company. Second, but equally important, LegalShield offers a product that everyone needs and everyone can use. You don't have to be a health nut to need the services of a lawyer. On top of that, LegalShield also offers an identity theft protection program. The coverage includes the member's spouse as well as minor children, and children under 26 living at home. This year the IRS told me that someone had been using my 2 year old son's Social Security number to file their own tax return, so I can see the value of identity theft protection.
I signed up as an associate today. I am compiling my "warm list" of contacts to tell about the business. Follow my blog to find out what I'm learning. You can find out more about this amazing company, and even become a member of my team, by going to my website: www.jasonpatrick.legalshieldassociate.com
I have heard mixed reviews about MLM, or "Network marketing" plans, but I also know people who have been very successful in it. When I recently contacted LegalShield to inquire about becoming an associate, the representative I talked with emphasized that I was becoming involved in a "home-based business," and never mentioned the words multi-level marketing, or network marketing.
I began seeking out opportunities in MLM companies because I was looking for opportunities to own my own business with the goal of financial freedom. MLM companies give the opportunity to be part of an established business system that others have been successful in. I discovered LegalShield on a nexera.com list of Top 25 Network Marketing Companies in the World.
What attracted me to LegalShield was its 40 years in business and the fact that associates are not required to buy and hold inventory. I have a one car garage and I can truthfully say that my car has never seen the inside of it because it is packed from floor to ceiling with no space in between for boxes of vitamin supplements from a marketing company. Second, but equally important, LegalShield offers a product that everyone needs and everyone can use. You don't have to be a health nut to need the services of a lawyer. On top of that, LegalShield also offers an identity theft protection program. The coverage includes the member's spouse as well as minor children, and children under 26 living at home. This year the IRS told me that someone had been using my 2 year old son's Social Security number to file their own tax return, so I can see the value of identity theft protection.
I signed up as an associate today. I am compiling my "warm list" of contacts to tell about the business. Follow my blog to find out what I'm learning. You can find out more about this amazing company, and even become a member of my team, by going to my website: www.jasonpatrick.legalshieldassociate.com
What kind of investor are you?
In my spare time I read books about business, investing, and success. I'm currently reading the Cashflow Quadrant by Robert Kiyosaki, author of Rich Dad, Poor Dad.
In the book, he talks about 7 levels of investors. He bases the levels on the levels originally conceived by John Burley. The Burley version is here.
Kiyosaki's 7 levels are:
Level 0: Nothing to invest (or, not really investors)
Level 1: Borrowers ("underwater" and "over-leveraged")
Level 2: Savers (opposite of borrowers)
These are people who hoard cash because they are afraid to lose it. They favor low-risk, low interest, low return investments. They fear debt because they have never learned the difference between "good debt" (debt that builds assets) and "bad debt" (debt to consume, which will consume you if it gets out of balance).
Level 3: "Smart" investors (aka, investors who are too smart to really learn how to invest the right way.)
Level 3 is divided into 3 subcategories:
3a: The "I can't be bothered group." Closed minded people who are not interested in learning how to make money work for them. Only know how to work for money.
3b: The Cynic. Negative thinkers who will discourage everyone around them. They can sound intelligent, but their fear of risk keeps them from jumping on an opportunity at the right time.
3c: The gambler. Loves risk, but tends to rely more on luck than due diligence. They end up losing most of the time.
Level 4: Long Term Investors. These investors are the first level who can bee considered investors in the true sense of the word. They have a goal and a vision for what they want from to receive in the future from their investment of time and money today. They invest their energy to develop a long term plan and they are actively involved. They tend to be conservative investors. Living below their means and following a debt free lifestyle provides them with excess capital available for investing. Kiyosaki mentions the book The Millionaire Next Door, which offers a thorough analysis of level 4 investors. I recommend the book for anyone who wants to learn more, or for help to get started at level 4. Fans of Dave Ramsey are taught to invest at level 4.
Level 5: Sophisticated Investors. Investors who have a solid financial background. They know how to invest for high returns and they are not afraid of risk. They have learned how to evaluate risk. They are learning the rules of the game of money by making deals and growing their asset base.
Level 6: Capitalists. The top percentile. The most successful of all investors. They make money using other peoples money. They have created systems that bring them income without their direct involvement. They employ people to work for them (4 hour workweek). Money and deals are attracted to them because they have vast experience and a track record of high returns.
Level 4 is the starting point of all long term wealth creation. Which level are you?
What? Another blog?
I started this blog with the goal of tracking my own successes and failures in the world of investing and business startups. I will talk about what I have personally tried and can recommend. Topics will include P2P lending and borrowing through Prosper and LendingClub, MicroVentures, a place to find opportunities for funding startup companies, and LegalShield, a company that offers legal services and identity theft protection to everyone for an affordable monthly price point. Without a plan, you will go nowhere. My goal is to become financially free and live the life I have always dreamed of by accumulating enough assets and passive income to allow me to retire before the age of 50. I am willing to do what it takes to pursue my dream.
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