Investing the Right Way (Without Breaking the Law)
By definition, investment means applying your monetary and non-monetary assets in a company, stock exchange, or a market with the expectation of receiving profitable returns in the future.
The main reason for capital investment is to get the best possible returns minus the risks involved. So, it’s necessary to know the percentage of your risks involved in the market you want to invest in.
However, you also need to make sure you are running your investments according to the law (probably hire a lawyer and ask for advice before investing). Doing a proper risk assessment on the market or a deal you plan to invest in will give you an idea of how much you stand to gain (or lose). Also, one factor usually involved in this assessment are the legal issues involved. Again, you can hire an investment research firm to help you assess risks and provide you with legal advice on how to go on about it. Brownstone Research review by NoBSIMReviews is one such investment research firm with analysts with impressive credentials and provides a diverse range of services to match different investment styles.
Table of Contents
Investing in Stock Markets
Stock markets and securities are precarious to invest in. Analyzing the market before investing can help you avoid traps and provide good investment returns.
However, the SEC (Securities and Exchange Commission) has specific laws for both public and private company investments and it has been enforced since 1930. The one problem that usually happens is that of insider trading which imposes heavy penalties. Insider trading is where one receives information that has not yet been made public, and as a result, investing or selling stocks exactly before the event, he/she stands to gain profits or save losses. This type of trading has been known to be illegal and imposes serious prosecutions.
Small private companies provide investment placement memos that determine the investment being offered. The company also has the responsibility to investigate whether the investor is accredited or non-accredited. Therefore, it is recommended that companies do not take upon offers for investment without investigating the investor’s status.
Investors should be aware of the key distinctions between value investing vs growth investing, as well as the circumstances in which each strategy is more appropriate for their objectives and preferences. This is not to argue that you should just employ one or the other, but realizing how these two investing approaches differ can help you better manage your portfolios and spot lucrative investment possibilities.
Investing in Private & Partnership companies
Private LLC companies and corporations provide their investors and management with protection. However, if the company is in trouble, the lawyers will have to investigate and possibly go beyond the veil to determine what’s wrong and inform the investors. They will attempt to strip the company book-by-book to provide proper legal protection to its clients. Therefore, managers need to keep the company running according to standard procedures to cover most of the potholes it may run into and save itself from trouble.
As for partnerships, it comes with different liabilities and legal procedures. There are two types of partnerships: general and limited. General partners agree and accept the penalties involved, whereas limited partners limit to the capital that has been invested. Therefore, we recommend engaging as a limited partnership where the risks are pretty low compared to the general partners.
Foreign investments are of two types: direct and indirect. Foreign Direct Investments are those where companies open up factories, buildings, and plants in a foreign country. These are considered to be suitable for long-term investments and help in boosting the country’s economy. Indirect investments include stocks and bonds invested at a foreign company.
Each country has its version of legal issues concerning foreign investments. Investments here can be in the form of currency, objects, services, or property rights and securities. In these cases, contracts have to be formed to cite the transfer of investment, taxation, returns, procedures to be taken if the contract concludes, among other things. Tax returns include full disclosure of the foreign investment and account, and keeping it informed to officials will ensure the investor is on the right track of the law. However, the investor will most likely have to go through an audit.
Foreign investments are seen to be an increase in economic growth. Usually, companies invest in foreign companies rather than individually to expand their reach.
Mutual Funds Investment
Mutual funds are a popular method of investment as it carries low risk and a regular income. Here, a group of people comes together to invest and receive equal amounts of profits with a low level of investment and diverse risk management. The manager then invests that capital on various securities, which makes the investors become shareholders. Most long term investors will reinvest capital gains to postpone taxation over the years and cashout during early retirement.
Different types of mutual funds are available on the market, carrying the additional risk and return policies for each. Mutual fund investments must comply with the SEC’s rules and regulations (SEC: Securities and Exchange Commission), which disclose information on the company structure, its operations, objectives for investments, etc. It also states that fraud and misrepresentation of the securities sale are prohibited and that the SEC can authorize the securities industry.
A low-risk investment, a deposit in banks, and post-office yields secure surplus funds in the future. They are generated with the amount of time which ranges from 30 days to 5 years. There are hardly any legal issues caused by this, as it is the most common and low-risk investing method.
Real Estate Investment
Land costs are always skyrocketing, and it is also considered a low-risk option of investment with fewer legal issues involved.
When investing somewhere, it is prudent that risk assessment is done before investing. Otherwise, you may end up with losses and bankruptcy. Some people invest less to minimize the risk. However, the return also comes out to be less. Therefore, higher investments are usually recommended to generate higher returns, but that also means taking a higher risk.
You must do your homework by assessing the risks involved and studying the market or company’s legal policies before investing in that company.