Alternative Investor

Credit Unions

A Credit Union is a profit sharing, democratically run financial co-operative which offers convenient savings and low interest loans to its members. The members own and manage their credit union themselves.

Credit Unions are now well established all over the world, they started in Germany 150 years ago and spread throughout Europe, to North America, Canada, Asia and to Ireland. In fact one third of the adults in Ireland are members of a credit union and they prefer to save within their local Credit Union rather than within a bank.

Credit unions are steadily increasing throughout the UK both in communities and the work place. ( e.g. Police Force, British Airways, Fire Service, local authority employees etc).
The three main aims of a Credit Union are:
To encourage its members to save regularly.
To provide loans to members at very low rates of interest.
To provide members with help and support on managing their financial affairs (if required).
Credit Unions are usually local affairs and the people who save and borrow from them share a common bond of region or workplace. Regional Credit Unions are usually well supported by churches, community groups, consumer councils, local CAB's,  trading standards, police, fire services and even local taxi companies.

Credit unions can provide a focal point for a community by bringing people together, to work alongside each other for their own benefit and the benefit of the community as a whole and can help to revive the local economy by keeping money in the community. Loans to members can mean income for local shops and businesses.

How can you invest in a Credit Union?
The members make regular savings, as little or as much as they wish. These savings then form a common pool of money from which loans are made to members. When members have been saving for a certain period of time they can apply for a loan from the pool. Interest on the loan is charged at only 1% per month on the monthly reducing balance. 12.68% Annual Percentage Rate (APR).
But Credit Unions do need to have reserves and these are usually provided by larger savings accounts being opened by local businesses, councils or by local philanthropists who can combine investment with support of the local community.

As a Credit Union grows it may declare a dividend at the end of the financial year. It can pay a dividend of up to 8% a year, although it will be unlikely to be able to afford as much as this during the first few years, however well established Credit Unions are paying a consistent 8% in returns, and your money is put at less risk than it would be with most major banks as Credit Unions do not get involved in complex trading schemes.

Add to that Credit Unions have to be registered with the Financial Services Authority, they are covered by the Credit Union Act 1979, they are independently audited and they are regularly monitored by the FSA. All this means that your money is quite safe. In fact during the recent banking crisis not one single UK Credit Union was affected.

Your business is private in the credit union because all members and Officers who have access to personal information must act in a confidential manner at all times.
Credit Unions are insured against fraud and theft, they provide life and loan protection insurance at no direct cost to the member payable to a nominated beneficiary.
The life savings insurance means that if you die, your beneficiary can receive up to twice the value of your shares.
The loan protection insurance covers the amount of  loan outstanding.
Credit Unions are certainly growing in popularity and there is probably one active near you, just check Google or enquire at your local CAB.

Investing In Digital Books

There are many digital book readers starting to show up in the marketplace and many people are happy with this. Digital books are environmentally friendly, easy to store and never get drawn on by your nephews and nieces.

Newly released books are supplied in digital format on release but what about all of the old books?
There is a price involved in digitising and the investment in the digitisation process is based on the potential digital market for the particular work.
But now there is an opportunity to invest in the digitisation of a book and to benefit from that investment.

Invest in Knowledge is a new, innovative (patent pending) initiative introduced by Kirtas in conjunction with the company’s Digitise on Demand program and retail Website, www.kirtasbooks.com. The program allows anyone to subsidise the digitisation of the world’s knowledge one book at a time.
Kirstabooks handle all of the legal frameworks checking that there has been no previous digital translation, arranging royalty fee's with the author/publisher adding your royalty fee to the books listing to ensure that your fee is paid and submitting the new digital book to the digital book library.

Anyone who purchases a book to be digitised, through the Invest in Knowledge initiative, from Kirtasbooks.com will receive a reprint of that book, as well as 5% of all future sales of that book through that website. Cost is dependent on the size of the book so a quote is given for each digitisation. Consumers can invest in as many books as they would like.

“This is such a tremendous opportunity for the average consumer to help support and fund the digitization of some amazing collections of books,” noted Tom DeMay, Vice President, Business Development. “So not only are consumers doing the right thing, but if they want to ask ‘what’s in it for me?’ We can give you a great answer. Several titles or one popular book could provide a nice return on investment over time, creating a true lifelong investment in knowledge.”

“This is the first mass digitization program that will make unique collections available to the public in a way that increases access, achieves preservation, and benefits at the same time the library, its patrons and the general consumer,” said Kirtas Founder and CEO Lotfi Belkhir. “And it does so without compromising quality or the ownership rights of the libraries to their digitised content.” To learn more about Invest in Knowledge, invest in a book or set up an account, visit www.kirtasbooks.com.

Everything you need to know?

Everything You Need To Know………
All investments whether classical or alternative involve a degree of due diligence and understanding. But do you know what to look for?

This week Alternative Investor looks at the Top 10 books that are suggested as required reading for every investor.

1) The Intelligent Investor
This is perhaps the most important and influential book ever written about value investing. Originally published in 1934 by Ben Graham, this work has been heralded by such notable investors as Warren Buffett as "the best investing book ever written". In it, Graham presents two types of investing styles - one for every day people who don't want to think about their portfolios ("defensive") and one for the business man or woman who wants to enjoy maximum returns ("enterprising").

2) One Up on Wall Street
It has been said that One Up on Wall Street should be the first or second book any new investor should read. In it, famed mutual fund manager Peter Lynch teaches you how to use what you already know to make money in the market.

3) The Essays of Warren Buffett
Anyone who is worth their salt as an investor has read the Berkshire Hathaway shareholder letters, written by Buffett. In this book, Professor Lawrence Cunningham selects and arranges these corporate "essays" by topic and relevance. It is a great tool to have handy and can teach you a lot about management, business valuation, investing philosophy, the use of stock options, economic and accounting goodwill and more.

4) Common Stocks and Uncommon Profits & Other Writings
Philip Fisher is one of the most prominent and important financial thinkers in history. In this book, he examines the fifteen qualities of an excellent business. When this approach is coupled with Graham's "value" method, it can be a very powerful thing.

5) Security Analysis
Security Analysis was originally written by Professor Benjamin Graham in 1934. Five editions and a million copies later, the seven hundred page investing treatise will teach you how to analyse and value almost any investment. If you take more than a casual interest in building your net worth, this book will change your life.

6) How to be a Billionaire
In this 250+ page book, the author takes you through the strategies of many of America's billionaires, going back more than 100 years to such names as Getty and Rockefeller, and ending with such modern-day titans as Bill Gates. It examines each of their strengths in an easy-to-digest format. This book is a fun and informative read.

7) The Interpretation of Financial Statements
Do you want to learn to read and understand financial statements? This classic investment book makes it simple. No matter how experienced an investor, the Interpretation of Financial Statements is a wonderful reference guide for those who want to understand published financial statements and reports. Although some of the information is slightly out of date, you can be sure this book will still be useful in twenty years.

8) 9 Steps to Financial Freedom
Renowned expert Suze Orman discusses nine steps each person can take to put themselves on the road to financial independence. Not just limited to investment, this book covers everything from retirement to life insurance. It is an excellent companion if you are looking for a well-rounded approach to bring fiscal responsibility and discipline to your life.

9) Use the News
This guide to the stock market from CNBC anchor Maria Bartiromo, discusses how an investor can separate the "news" from the "noise", allowing them to focus on what is truly important to their investments.

10) Financial Shenanigans: How to Detect Accounting Gimmicks and Fraud
The second edition of Howard Schilit's book teaches investors to detect financial fraud and aggressive accounting in annual reports, financial statements, and SEC filings. There are dozens of real-life examples ranging from film to tech companies. If you take more than a casual interest in your investments, you should consider owning this book.

Taking a SIPP

Self-invested personal pensions (Sipps) open up an almost unlimited world of investment choice with the likes of fine wine, zoos, residential property and even a yacht berth among the more unusual investments you can hold.
Sipps have changed pension investments from the fuddy-duddy to something that can be much more hands on. This means that as an individual you can really engage with your pension.

Commercial property, including land, is probably the most common exotic investment, with all manner of properties falling into this category.
London based Talbot & Muir were approached by four clients with old insurance company schemes to buy a zoo in the South of England, so they set up a group Sipp to do this. They now own the buildings and the land, but not the animals.
Sporting venues, including racecourses, dog tracks and football stadiums, are another potential investment. For example, some Talbot & Muir clients hold part of a second division football club stadium in their Sipps. The club's fans were offered the opportunity to buy a share of the stadium and around 50 of them took up the offer. Their pensions receive rent from the club, but they also get to invest in something they understand and love.

Overseas commercial property is also an option with everything from land in Eastern Europe to hotels in the Far East held in Sipps. "We see plenty of hotel complexes in Koh Samui in Thailand and in the Turks and Caicos Islands being put into Sipps," says Martin Tilley, pension consultant and business development manager at Dentons Pension Management. "I also have a client who owns a yacht berth in the south of France through his Sipp. This is basically 400 square metres of water, air and wood, but it has generated a 12 per cent yield as well as is appreciating in value over the last five years."

For something even more earthy, Japanese love hotels (http://en.wikipedia.org/wiki/Love_hotel) can also become part of your pension investment. There are around 25,000 love hotels in Japan, attracting some 500 million visits a year. Western culture which tends to be rather strict about casual sexual activity means that a UK love hotel would probably be closed down within a few months, but in the far east they are a legal booming trade and investement with many being styled in the form of ornate castles, and usually offering very high standard rooms. Offering the opportunity to tap into this is Japan Leisure Hotels, a closed-ended company registered in Guernsey that currently invests in five branded love hotels in Japan.

But, although commercial property is a permitted investment, caution is still required when adding it to a Sipp portfolio. If you're investing in an overseas opportunity, you need to be aware of the country's legal framework. This can affect ownership as well as your tax position.
It's also important to make sure that the investment is permitted. Dentons web site explains that complex schemes can fail to meet the criteria because of a minor detail, for example if a hotel complex includes a couple of weeks free accommodation, this would be classed as a privilege and it wouldn't be permitted. Where this type of offer is included it would have to be stripped out before it would be acceptable as a Sipp investment.

It's also possible to invest in many of the assets that have been blacklisted, such as residential property, fine wine and art, as long as you don't hold them directly. Instead, you can include them through a fund, providing it is what HMRC terms a 'genuinely diverse commercial vehicle'. To be considered a genuinely diverse commercial vehicle, the fund must have a value of at least £1 million pounds and must hold at least four properties; with no one property making up more than 40 per cent of the total fund.

The Sipp providers have seen a number of funds that satisfy these criteria. For example, London Central Portfolio, which runs funds that buy properties in prime locations in London to renovate and then let to tenants. For an alcoholic Sipp investment, Curzon Capital's Fine Wine Geared Growth fund, which invests in investment-grade wines from the Bordeaux region of France.

Obviously you will need to ensure that the fees and charges for managing these fund investments do not outweigh the tax advantages.

But while these investments are fun and can help to diversify as well as spice up your portfolio, they do come with wealth warnings.
In particular, once you get beyond the reach of regulators such as the Financial Services Authority, there's much less control over what is included in marketing literature.
Additionally, plump for something HMRC doesn't like and you can be stung badly. A tax charge of up to 55 per cent on the value of the asset can be applied against the member and up to 15 per cent on the Sipp provider. It used to be much more straightforward before the pensions regulations changed in April 2006. Investments were either on or off the permitted investment list. This list doesn't exist anymore, so check carefully and if you are still unsure get something in writing from HMRC to confirm.
Most reputable Sipp providers that will consider the unusual are keen to point out the extent of the due diligence they carry out before giving an investment the all-clear.
Tax is certain, so be very cautious about ensuring investments are permitted.

Investing in IP

One key characteristic of an investment is that it is an entity that produces or grows on its own rather than keeping static value or losing value. This certainly applies to intellectual property.
As the digital economy continues to grow it is likely that this aspect of the economy will continue to grow despite the fact that the legal system is still catching up with it.

Digital assets are traded daily through various channels. Some digital assets command high values, even more amazing is the fact that most of the digital assets commanding the highest values are coming from the gaming industry for example the Betfair software development is the greatest high value asset that the company owns.

As this market continues to grow it is expected that other segments of the economy besides the recreation/leisure channel will begin to value and trade digital property..
One of the major problems faced by new technology seed and start-up enterprises is access to the first round of funding, either through debt or capital investment.
Venture capitalists want to know where an invention or innovation fits in the marketplace with reference to existing and potential competitors. The potential investors also want to know if the invention or innovation offers a dramatic and sustained advantage, and whether there is compelling evidence to warrant building a business based on the invention or innovation. They seek to evaluate both the strength of an innovation and the ability of the entrepreneur to motivate a commercial product.
Without the strength of the intellectual property and its protection, little if any investments would be made into new or growing enterprises, and so it is no surprise that IP has become a major economic driver.
The economic value of a patent, a trademark, software, a domain name, and any intellectual property must be carefully weighed before it receives capital investments, and the investor should really be aware of the product that the investment is going into and what kind of returns may be forthcoming.
One of the most important issues evaluated by investors is the security of intellectual property. Normally, a strong patent position is desired and the issues of ownership of intellectual property need to be well understood.
Over the last decades patents have played an increasing important role in innovation and economic performance, and having an investment in IP at it's earliest stages is where most of the returns are made.
IP has its pitfalls as an alternative investment, but with technology still being the greatest driver in economic growth it is likely that IP investments will become more common, perhaps one day being traded as openly as shares in a company. After all, who would like to have invested in 1% of Microsoft Windows a few decades ago?