Wise Investments/Hard Money

The fundamental goal of investing is to make the best return on your money given the level of safety that you require.

Simple and smart, right?

It would be great to meet this goal with an equally simple investment. The fewer things we need to worry about, monitor and manage, the better; it gives us more time to enjoy our lives and concentrate on the things we do well.

The financial world has exploded with investment instruments and strategies over the last couple of decades. Today, even the average investor can easily get involved in stocks, mutual funds, hedge funds, index funds, commodities, currencies, precious metal, real estate investment trusts, inverse index funds and more.

Low index fund fees?

Many investors, in an effort to simplify, have opted for index funds. These are mutual funds that are a market basket of all the stocks that are used to comprise one of the indexes by which we measure the ups and downs of the stock market. Index funds that reflect the Standard and Poor’s 500-stock index (S&P 500) are very popular.

The idea is that over the long run the S&P 500 will gain value at a nice rate. Further, because selecting the stocks for the fund is merely buying the same stocks used for the S&P 500 index, there’s no research or difficult management involved, in fact the entire process is automated. Therefore, investors believe that the fees built into these index funds will always be extraordinarily low.

That’s where the logic falls apart.

How fees erode value

In a recent USA Today article, John Waggoner pointed out some of the fees charged by these index funds and it was an eye-opening revelation. He called out one index fund that has a 2.3 percent fee built into it. That means if your investment is worth $10,000, the company that manages the fund is going to take $230. That may not seem like much, but if the fund grows at an average of 9 percent, and you hold it for 30 years, you will pay more than $66,000 in fees over the course of those years.

There’s one more thing I need to mention, funds like these must disclose their fees, but it’s not a number many investors really focus on, especially after they have purchased the fund, yet it’s there, year after year, eating away gains. Even worse, some investors see the high fees and think, “Gee, such a high fee, it must be a great fund!”

A better way to simplify

At Evoque Lending we have a better – and much more straightforward – approach to getting a great yield on your investment funds and the safety you need: First Trust Deeds.

First, let me say that we’re beating that 9 percent rate of return I used in my example; our investors are getting a double-digit ROI. Second, we build in some 40 percent protective equity into every First Trust Deed, so that gives you the level of safety you need. We also are pros at vetting our borrowers, so we are confident in their ability to keep up their payments.

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Further, I’m sure that you have some experience with real estate transactions. There are never any hidden fees. You know exactly what your return is going to be, in fact you’ll receive a check for the interest every month

Contact us for more information

At Evoque Lending we specialize in California real estate, especially Los Angeles, Orange County, and property in the San Francisco area. With more than 15 years of experience in these California markets, we know the ropes.

If you really want a smart and simple investment that will enhance your portfolio, give us a call or drop me an email. I’m sure you have more questions. We would welcome the opportunity to show you how investing in First Trust Deeds may help you achieve your goals.