Tuesday, June 20, 2006

The power of pooled money

I would like to discuss what I believe is an important point, and that is the value of pooled money. An investment group can accomplish so much more than an individual. From what I have seen so far, in general the larger the deal, the greater the profit. A primary benefit of pooling money together is that it provides financing for projects that I would not be able to undertake as an individual, and hence access to greater profits. A second benefit of pooling money is that it provides diversification - the group can invest in many projects simultaneously and the group member can spread his/her investment money across those various projects, which provide both geographic and sector diversification.

I've also found investment discussions with other group members to be enlightening. Some group members have already analyzed all of the paths I am just starting to explore, and can provide their experience, analysis, and opinions. There are also a few sharp accountants in the group, and I find it fun to learn from them.

To post or not to post?

I haven't posted in a while, but have actually been quite busy with both financial and personal activities. I have hooked up with an investment group that has access to a lot of projects and development deals, and have begun to actively participate.

While I think I have some unique experiences to bring to a financial blogging community, I am struggling with the issue of privacy. I want to provide enough details about deals to be meaningful but providing these details would make me easily identifiable by my investment group members should they stumble across this blog, since my investments are focussed and specific and not just a matter of buying some stock, mutual fund, commodity, etc.

These deals are interesting because they give me access to the internal balance sheets , income statements, bank appraisals, and comp analysis of a wide range of projects. With increasing exposure to this information, over time I will get better and better at evaluating what is a good, safe investment, and what is not.

I'll have to think about an appropriate presentation of those ideas. But I do want to suggest that looking outside of traditional investment arenas can provide access to higher rates of return compared to the 5-10% you can make on CDs or stocks. I am currently involved in projects expected to yield 12% - 25% annually, and have seen projects that have returned as much as 200-300% annually to other investors. 15% seems safe and easy, and since I am just starting out, I've opted to just dip my toes in the water.

I have also come to realize that the largest roadblock to building great wealth is time, and nothing else if you don't depend on pure luck (for example, a lottery ticket or stock option valuation). How many investing years do I have left before I'll want to stop or am distracted by other more important life events, and how many great deals will I come across in that time?