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Ponzi Schemes – What You Need to Know

Ponzi schemes are fraudulent investments that involve paying off investors with new investors. Schemers will gain new investors by promising opportunities for investments funds that will supposedly generate high return rates. They often claim these high return investments will come at little to no risk. One of the most recent of these schemes was masterminded by none other than Bernard Madoff. While investigations into the Madoff scheme are still being undertaken, facts show that Madoff spent decades scheming celebrities, nonprofit organizations, funds, and banks in what would come to be known as the biggest Ponzi scheme in history. His devious actions would scheme these people and institutions out of $50 billion, earning him a 150-year federal prison sentence.

The term “Ponzi scheme” was named for Charles Ponzi, a businessman and swindler in the early twentieth century. He asked thousands businessmen around New England to invest in his Securities Exchange Company, promising as much as a 50% return in any investments in three months. He even went as far to buying international mail coupons in order to make his scheme appear legitimate. In only six months, Ponzi was a millionaire—the epitome of the get rich quick scheme.

Determining whether or not an investment opportunity is one of these scams can be difficult, but not impossible. All Ponzi schemes share similar characteristics for which investors should be on the lookout. The major red flag is the promise of high investment returns with little to no risk involved. No matter what, investments carry risks. Those that have higher yield returns often come at greater risks than more conservative investments, so be suspicious of any investment that guarantees anything. Also be wary of overly consistent returns, since legitimate investments will go up and down over any given length of time.

Investments should always be registered with the US Securities and Exchange Commission (SEC). Scams are typically not registered because investors will be given access to the company’s information, services, finances, and other information. All investment professionals should be licensed, so be on the lookout for unlicensed sellers or unregistered investment firms. Avoid anyone with secretive strategies and always be on the lookout for account errors. If you have trouble receiving a payment or cannot cash out an investment, it could be a scheme. Ask yourself if the investment is registers, if the seller is licensed, and how the risks compare to the potential earnings.

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Investing in Utilities – A Good Investment for 2012

Utilities are everywhere. They’re used by everyone from the biggest corporation down to single residents. What makes investing in utilities so attractive is that the services being provided are basic. Electricity, natural gas, and water being provided to consumers are so essential that a downward spiraling economy has little to do with the amounts of these services being purchased. Everyone needs electricity, everyone needs water, and people will continue to pay for these services. This makes utilities an appealing sector for investors because buying into them means diversifying a portfolio, potentially cutting down on portfolio risk.

Investing in mutual funds that target utilities is an easy way to break into the sector. Experienced investors may consider purchasing exchange traded fund shares, which are similar to mutual funds and allow for partial ownership in the company. As of the final weeks of 2011, the top ETFs slated to do well in 2012 are ProShares Ultra Utilities, Rydex S&P, First Trust Utilities, Utilities Select Sector, and Vanguard Utilities Index. The best projected stocks of 2012 are Westar Energy, Southern Co., Progress Energy, Pinnacle West Capital Corp., and MGE Energy, all of which have received an A+ rating by The Street.

Utilities often outperform other sectors on the market, so investing in related companies may be a good bet as well. Buy shares in manufacturing companies that provide products to utility companies. Novice investors should remember that investing is not a hobby. This is playing with the big boys, so treat any investments made as a business venture, not something on which money can be thrown away. Don’t view investments as playing the lottery or gambling at the casino. Do some serious research before making any investment since you don’t want to risk what you do have on attempting to learn the ropes.

Beginning investors not experienced in money management should consult professional financial advisers. Investment management software is a great way to learn how to manage investments while gaining the knowledge necessary to break into a volatile endeavor. Investors should understand the most basic accounting principles as well as have an understanding of the stock market industry. An interest in utilities will help better understand the utilities sector, as any other interests will help with subsequent sectors. Practice makes perfect in the investment world, so don’t expect a huge payoff right away. You will most likely lose more than you would like in order to wise up to the market.

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Investing in Transportation – Logistics is a Logical Choice

Smalltime investors often soak up all information they can before dreaming of stock purchase agreements, the foreign exchange, or commodities, but consider America’s infrastructure. Transportation and freight is the backbone of our society, and investing in automotive and transportation logistics can be a smart move. While much of the world’s economy is facing an uphill battle, the logistics sector keeps on trucking. In fact, it’s the fourth-largest sector in the United States economy and is estimated at over a trillion dollars nationally. The large fragments and big profits have made it an attractive place to start investing, and progressive investors can help the country step into a cleaner, more efficient infrastructure.

As for logistics and air freight investments, you can’t do much better than UPS. The United Parcel Service consistently ranks ahead of the rest on the stock exchange and is closely followed by FedEx. One up-and-coming logistics company, with a watch interest at 2%, is Express-1 Expedited Solutions. Other companies to keep an eye on are UTi Worldwide, Hub Group, and Air Transport Services Group. Investing in logistics is logical because without these companies, there would be no products being put out on the shelves for consumers to buy. And investing in small, third-party logistics companies can prove just as fruitful as investing in the major trucking and railroad industries.

Investing in trucking and small-time logistics has been a smart move for at least the past two years, all while other investment industries have taken a major hit. Some of the smaller companies like Hub Group are still carrying bargain prices for which shareholders will be hard-pressed to miss. Smaller investors may even consider buying into local trucking companies or even purchasing big rigs that can be leased to companies for quite a hefty profit.

Opportunities for this type of investment even exist across the rest of the world. Freight forwarding services in China are being developed due to the overwhelming opportunities that exist there, mostly without competition. Investing in companies that are taking these freight forwarding businesses abroad may be the ideal solution. Domestic railroads are another good option because distribution and manufacturing facilities will often use railroads as well as trucking services to bring goods and services to the masses, and with environmental concerns ever more present, the railroad may be one source of technology that we look back on and revive within the next couple of decades.

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Investing in Telecommunications – The Problem with Broadband

Telecommunications is a blanket term that consists of Internet, video, and voice communication services. This includes Internet service providers and cell phones, two services that almost every American uses on a daily basis. With electronics such a big part of our modern lives, investors are looking to cash in by investing in telecommunications. Aside from telephone and Internet services, investors look into television and other forms of media to diversify their portfolios. Broadband Internet, satellite TV, satellite Internet, mobile Internet, cable TV, and online video chat services are far-reaching, influencing consumers around the globe.

Telecommunications may be, in fact, a no-brainer investment. This sector has consistently been one of the favorites for American investors because of the lucrative payouts and consistent growth of technology and demand. What some investors don’t realize, however, is that the American telecommunications sector is actually lagging behind its foreign counterparts where broadband Internet is concerned. These providers in the rest of the world offer services at lower prices, and these broadband services come with much faster speeds than that in the United States. Because of this, foreign investors have much more to work with in markets that are not overly saturated like the United States market.

This doesn’t mean that investing in broadband in the United States is a bad move. A broadband deficit can only mean that there is plenty of room for improvement, which could translate into earning potential. Domestic investors can also take advantage of foreign markets by buying stocks from countries that are leading technology and Internet development. Some US-traded stocks that exist in promising foreign markets include America Movil SAB de CV, China Mobile Ltd., Millicom International Cellular S.A. and VimpelCom Ltd.

Investors not wanting to dunk a huge amount into one investment may consider exchange-traded funds (ETFs) from the international telecom industry. These include SPDR S&P International Telecommunications Sector ETF and iShares S&P Global Telecommunications Index Fund. The more innovative domestic companies will be startup endeavors that are created on a foundation of brand new ideas, and plenty of these types of investment opportunities exist and are in need of investors to help get them started. The US is aware of the lack of telecommunications technology and has implemented certain programs like the Broadband Stimulus, which is one indicator that the future will only get brighter for investing in telecommunications domestically. In the meantime, weigh all options before making any major financial investment decision.

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Investing in Structured Notes – Risky Diversifying

Any investor who hasn’t heard of investing in structured notes should take a look at the opportunity with a certain level of caution. Structured notes came out shortly before the recession and were hailed as exciting new investments. Structured products are also called market linked investments and are essentially pre-packaged investments that are based on things like commodities, indices, foreign currencies, and a number of other derivatives. They were designed to meet needs that otherwise cannot be met from the more standard financial measures on the market. As such, they are often used as supplement investments to diversify portfolios, cutting down on portfolio risk and taking advantage of current market trends.

The note is financially backed by the issuer. In the event that the issuing firm goes into bankruptcy, the structured note is repaid at a specific rate, and principal protected notes are not insured by the FDIC. A structured investment is not designed to be traded like stock. Think of them more as certificates of deposit that come with a maturity date. Any investor trying to sell a non-mature structured note will suffer a loss due to hedging fees and other charges that put the selling price below the original issue price.

Keep in mind, however, that structured notes are essentially nothing more than investment bank IOUs. They allow you to easily diversify your portfolio, but there are plenty of risks involved, one of which is credit risk. As with any IOU, you don’t actually have the money and there is always the chance of the debt being forfeited by the investment bank. This could mean that the note become worthless, as we’ve seen happen with the structured notes provided by Lehman Brothers. They also lack liquidity which is an important characteristic to have in investing. Prices are calculated by questionable means and much of it is guesswork, which could mean a drastically differently price than the asset value.

The buffered return-enhanced note or BREN is the most common type of structured note. These offer some amount of downside protection but are still considered risky. What’s worse, investing in structured notes is such a complex endeavor that it’s difficult for even the most seasoned investor to grasp. Any investor considering diversifying their portfolio with structure products should do the research thoroughly before jumping in. The illiquidity and credit risk alone may be enough to turn off experienced investors who would rather purchase a more modest CD.

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Investing in Small Businesses – Focus on the Local Economy

Investing in small businesses is a great way to help out your local economy while hoping to see a good rate of return on your investment. The one thing to keep in mind, however, is to never put in more money than you can afford with any small businesses venture, no matter how promising it may be. There is always a risk involved with any type of investment, and there’s no way of knowing how any local business will fare in any economy, let alone during a recession. Only use funds you have previously set aside for investments. Do not borrow against your retirement, your kid’s college education fund, or use money that needs to go toward medical expenses and other loan repayments. This is a good rule of thumb no matter the investment.

Keep in mind that the state doesn’t go through the hoops of evaluating a particular investment, so even if the small business has filed with the state to sell off securities doesn’t mean that the investment is sure to pan out. A better way to spread your investment around while cutting down on your portfolio risk is to invest smaller amounts into multiple businesses. When investing, remember to avoid putting all of your eggs in one basket.

Do some analytical work before going with a particular company. Find out how long they have been in business. Start-up investors may be asked to pay more than what the shares are worth. You also want to find out how much experience management has and how successful the managers were in previous ventures. This will be a good indicator of how successful the current business venture might be, although it’s not a guarantee. Find out if the business’s marketing plan is realistic and if the company has the resources to market adequately.

The small business sector was hit hard by the economic meltdown, but investing in small business loans could prove to be quite lucrative. Invest in peer-to-peer lending if you have the funds available. This is simply lending that occurs directly between individuals without the intermediation of banks or other financial institutions. You control how much interest you charge on the loan and you may be able to help out up-and-coming businesses that otherwise would not have qualified for monetary help from major banks. Check out peer-to-peer lending clubs if you want to start such an endeavor but don’t currently have funds available. A good credit score may be all you need to get started.

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Investing in Renewable Energy – Solar Power

Following the collapse of the California-based solar company Solyndra, investing in renewable energy like solar power may be the last thing on most investors’ minds. All this fiasco proved was that not even the government is above and beyond making risky investments, and the reality is that other government-subsidized solar companies are thriving. Consumers around the world are demanding clean energy and a break from the fragile energy structure on which we currently rely. Despite this one company going into bankruptcy after receiving government support, thriving companies like the highly-established First Solar (FSLR) have plenty of shares on the market.

Investing in renewable energy like solar comes with risk because this kind of technology is still in its infancy. Investors, as with any endeavor, should be prepared to lose investments. Some companies that both novice and experienced investors may consider are DayStar (DSTI), General Electric (GE), Honeywell (HON), Westinghouse Solar (WEST), Ocean Power (OPTT), and MEMC Electronic (WFR). Research these companies carefully before deciding which one in which you want to invest. The reality is that demand for solar power is only expected to increase, so now could prove to be the ideal time to jump on board.

Solar panels have been available in some form or another for decades, but they were unrealistic to buy due to extremely high costs and complex maintenance. Modern companies have taken this tried and true technology and made it more user-friendly, so to speak. Residential solar models and widespread solar maintenance and installation companies are making it easier for any individual to add solar technology to his or her home. In fact, the solar power purchase agreement has freed homeowners from paying as much as $24,000 in installation and maintenance costs, not to mention the tax breaks that come along with installing the technology.

Although solar power has been around for many years, it’s only just becoming the sensible choice for homeowners and businesses. Residential solar power is slated to become the cheapest, cleanest form of power, at least until something better comes along, so alternative energy companies will constantly look for ways on which to improve current models and make the technology even more affordable to consumers. Some investors will also appreciate the feeling that they are contributing to a brighter, cleaner tomorrow by investing money in alternative energies today. With the possibility of reaching peak oil looming, it’s safe to say that alternative energy is the investment of the future.

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Investing in Renewable Energy – Mutual Funds

Investing in renewable energy is likely to be the investment opportunity of the future. In a world where billions of dollars are subsidized in the oil industry for a commodity that will inevitable be depleted, sources like solar and wind have the potential to run the planet for free. Naturally, and perhaps controversially, capitalizing on renewable energy will happen sooner or later. Just like investing in commodities like gold has been popular throughout history, renewable energy mutual funds are seeing recent growth that has produced plenty of investment options. Not only are people drawn to this type of investment for future earning potential, but there is the feeling of being responsible for progressing the planet and improving local economies while preparing for the consequences of depleting oil supplies.

Investing in renewable energy is possible with individual stocks and mutual funds. The New Alternatives Fund (ticker symbol NALFX) has been investing in the environment and alternative energies since the early 1980s. They avoid investments in oil, coal, nuclear power, weapons, and tobacco while steering clear of companies that have discriminatory hiring policies and unfair labor practices. The company’s main focus is on investments in wind power, fuel cells, ocean energy, hydropower, energy conservation, solar power, hydrogen, biomass, and geothermal energy.

Another investment is the Calvert Global Alternative Energy Fund (CGAEX) which seeks long-term investments from companies already active in alternative energies. As with any mutual fund, investors run the risk of losing invested principal. Other investments include the Guinness Atkinson Alternative Energy Fund (GAAEX), NASDAQ Clean Edge U.S. Liquid Series ETF (QCLN), and the Powershares Global Clean Energy Portfolio (PBD), to name a few. Any downturn in alternative energy industries would impact this type of investment more so than any other, but alternative energy seems to be driving a steady course. Economics, currency fluctuations, and the political climate may alter the risk of investment.

Investing for cash flow is a huge risk for any individual, small business, or corporation, but there is still plenty of room in the alternative energy sector for active management. Unlike other sectors that have been invested in for decades, this brings a relatively new opportunity to anyone willing to take the risk. It’s one investment idea that hasn’t been picked up by the majority of investments, which means there’s the potential for serious money to be made. Along with that, there comes the chance to really feel like you’re doing something good for the planet.

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Investing in Real Estate – 101

Although it may not seem like the time or place, investing in real estate is one of the best things an investor can do in today’s depressed economy. House prices are lower than ever and interest rates are projected to remain low at least until 2013, so buying up rental and other investments properties now is a no-brainer. More than that, the real estate market in the United States is slowly beginning to recover. There have been a few bumps in the road, to be sure, but buying up properties now when they are priced at their lowest will mean selling them for higher prices in a couple of years, and what investor can shy away from that?

Of course not all investment properties are the same, so investors have to ask themselves what they want to get into. Smalltime investors may consider buying a house that can be converted to a duplex or at least has a basement apartment for tenants. Becoming a landlord during this economic recession may prove to be easier than one might think; then you have the benefit of drawing in a regular monthly income from the rental itself.

Residential housing is the easier route for first-time investors. Investing in commercial real estate or even land brings about more challenging conditions, but it’s not impossible for beginners to learn the ins and outs of this unique investment world. Any beginner should seek out the expertise of experienced investment property realtors that will be great sources of knowledge when looking at properties. If you plan to rent out houses or even apartment complexes, research local landlord and tenant court cases to see what challenges might be lying ahead. You want to know what to expect so you can legally cover all the bases with that first lease.

Location is everything, even with renting. Buying investment properties to fix up and sell later rely on location even more. Pay careful attention to crime rates and school districts in the neighborhood. Having access to public transportation may also be a bonus. Most people want to live close to where they work, so buy a property that is close enough to a major town or city so people will be drawn by the amenities and short commute. Anything too far out will likely carry a much lower rental price. Ambitious real estate investors may consider enlisting the help of local property management firms that handle the rental affairs as far as collecting payments.

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Investing in Information Technology – Innovative Investing

Investing in information technology can be confusing because it’s such a diverse subject that is split into multiple sectors. On the one hand there are the electrical equipment and the electronic sectors while on the other is the sector that focuses on support services. Software, computers, and other types of technology may seem like a no-brainer as far as investments go, but this is one arena on which the players are frequently changing and new, better players are arriving every day. That can be difficult, if not impossible, to keep up with. But information is vital to our society and has become incredibly value.

Anyone looking into investing in USA sectors will find information technology has a lot to offer. Apple (AAPL) and Google (GOOG) often headline the stock market while more innovative companies are paving the way toward promising investment opportunities. One of these is Gartner, Inc. (IT on the New York Stock Exchange). This $3.75 billion company has provided technology research and services to IT employees, customers, and managers. The numbers per share is expected to jump by as much as 26% in the year 2012.

IBM has also become a major player on the New York Stock Exchange. Its proven performance has impressed investors when similar companies have fallen short and burned out. In fact, the company’s profits exceeded the analyst estimate for the 2011 second quarter, and that number is only expected to rise. It may have to seek to steal investors from Cardtronics, the country’s largest operators of ATMs. With such a growing number of shares in 2011 and more automated teller machines being produced within that timeframe, the 2012 profit should grow by as much as 16%. DST Systems and Virtusa Corp. are two other promising options. Virtusa Corp. saw an impressive rebound in 2011 and is expected to stay strong into the New Year. DST Systems enjoyed a 26% gain in early 2011 alone following a great four-quarter earnings streak. Besides that, there has been talk out bigger companies wanting to buy out DST Systems, which is an even better reason for investing now.

Investing in information technology is as risky as any other endeavor, and projected exchange rates may not turn out to be as expected. Still, this sector is not only the wave of the future, it’s the here and now, and with so much demand on newer, more innovative technologies every year, it’s certainly something to check into.

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