Thursday, February 15, 2007
Low Risk Investments - They Can Yield High Returns!
Low risk investments are those investments that historically have proven to rise over time with low downside volatility.
Many people believe that the lower the risk the lower the return, however there are exceptions to the rule and one of these is investing in land.
UK Land A Low Risk Investment
When most investors think about low risk investments they dont think about land - they normally think of bonds, money market funds, savings accounts, and blue chip stock mutual funds.
Land however has proved itself as a low risk investment, and in the right location, land can yield a return far above traditional low risk investments.
With a 920% average growth over twenty years, UK land values have provided much better returns for astute investors than most discretionary asset advisors - even in high-risk investments such as growth mutual funds.
The Advantages of Buying UK Land
The advantage of buying UK land is that demand is out stripping supply and this scenario looks set to remain in place for the near future.
Many international investors are now buying into UK land - here are five reasons why:
1. The UK needs 4,400,000 new homes over the next 20 years.
2. Houses in 90% of towns in the UK are unaffordable for first time buyers, and low cost housing can rectify this.
3. The UK is the second most densely populated country in Europe and has a fast rising migrant population creating strong demand.
4. Over the last 30 years, the demand for new homes has increased by 30%, whereas over the same period house building rates have dropped by over 50%.
5. Action is now urgently required to address the acute shortfall in affordable housing.
Low Risk Investments and Diversification
Most asset advisors recommend spreading your investment portfolio into several different asset classes to maximize income and capital growth potential, and land can provide the perfect diversification.
Land is an easy to understand investment, unlike stocks or equities, you own something thats real, and it has historically risen in value.
Many investors believe that buying land is expensive and in the past, this was true, but now there are many companies catering for the smaller investor.
Whats the Catch?
All investors want to make big money and get rich quick, but most sensible investors know there is no such thing as money for nothing and they are correct.
The location of the land provides the risk in land investing - to make capital growth from land investment and maximise capital gains you need to buy land that is ripe for development. This means the land to built on is located in a sought after area. This requires research and homework, but there are many reputable companies offering this service so you can rely on expert advice in planning your land investment strategy.
Maximising Risk and Reward
Of course, a hedge fund investment could provide you with greater growth potential, but land, taking into account the risk / reward, makes it a very attractive addition to your portfolio.
We quoted an average gain of 920% in UK Land values over twenty years, and the important point here is that this was the average. With careful selection of the location in which you buy your land, gains could of course be much larger.
In conclusion, land gives you above average gains combined with low downside risk, and you should consider making land a part of your low risk investments strategy.