There are billions of dollars sitting in bank accounts, IRA accounts, brokerage accounts and other places are earning next to nothing. We have millions of dollars of 1031 exchange money coming through our office during the exchange period. The interest paid by banks is one half of .1%. That is one half of 1/10 of a percent. It hardly measures and is often offset by bank fees.
Money Instruments. Investors or the general public trying to live on money investmentshave found that it is not possible with the current yield on money market accounts, CDs or other bank paper. Treasury bills and treasury notes are not much better. It does not make sense to commit funds for 10 years and still receive a negligible return. At current and projected inflation rates in the 2% range, investors have a negative return with money instruments.
The Stock Market. This is a major investment source for a large number of investors and the only tool that many people use. Three US economists recently won the Nobel prize. Prof. Hansen, an economist at the University of Chicago found that approximately 97% of mutual fund managers have not shown enough expertise to cover the expenses they charge. In other words throwing a dart at the list of stocks would probably do better. Another Nobel laureate, Robert Shiller, of Yale University published in 2005 that the US housing market was vastly overvalued. He now says that the S&P 500 stock index divided by the average of the past 10 years earnings is now at the highest level ever seen. That should be a caution sign for stock investors, but they rarely listen to advice.
What to Do. Offer your friends and family an opportunity to invest along with you in proven, low risk tools that yield 6% to 8%. That is infinitely better than they are receiving from banks and offer a livable return. Investors can learn about tax certificates and tax deeds in their state if they are viable. It takes some study but the returns are good and safe. First mortgage investments at 50% or less loan to value on good properties in good areas are available. The investor can join in the investment with the small share and if the property must be foreclosed, the investor can handle that and all parties will be paid. The private citizens do not have the knowledge or the inclination to get involved. Property values are generally creeping up in most markets and the safety is increasing. An investor can take a small second mortgage position and still be on safe ground.
Receivables from tradesmen are available in every market and offer good profit margins with a minimum amount of work. Private loans can be good and safe on cars, mobile homes and other personal property secured by recorded liens. Most investors have the skill to execute these and other techniques. Your family and friends will be thankful as you all prosper. Having direct access to your IRA funds is important for speed and flexibility in making deals.