Stage right, exit: Bowing out of the investment arena

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Save for some, many venture capitalists stay with a business for a long time. From the business’ inception to its growth and flourish, they remain faithful to the company’s goals and endeavors, unwavering in support and presence. The same is true with some investors who have developed some sort of affinity for a particular company. From the initial public offering to the height of a bullish run—even through the bearish times—they remain invested. If they’re lucky enough, this loyalty will eventually pay off, and the company will grow to become a valuable piece of business property that yields a substantial profit.

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But one cannot play the markets forever, and sometimes, even the most loyal investor may want out in a particular investment due to several reasons (e.g., investment objectives have already been met or to mitigate impending failure). In all cases, however, individuals must have an exit strategy at hand before finally bowing out of a particular investment.

Exiting is straightforward for investors who own company shares via publicly traded stocks, as the shares can be easily floated back to the market where many other investors are willing to buy the stocks in their current prices. But for venture capitalists who own shares of private companies, getting out of the investment may not be as easy. In this case, the only exit strategy available for them is the first opportunity to transform their ownership (which is an illiquid asset) into cash (a liquid asset).

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Momentum leverage: Exploring the world of opportunistic investing

Most investors are familiar with the investment advice “buy low, sell high”—a strategy that involves buying assets at their lowest prices and selling them later for a much higher price. By doing this, investors can prevent untoward losses and instead profit from their active engagement in the free markets.

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But with the diversity of investment activities, not all investors use this strategy in the same degree as others. Some of the emotional ones tend to exit the market during a bearish run, probably in an attempt to preempt further losses, thus taking full advantage of this advice. On the other hand, some investors stick to this principle and take full advantage of the market momentum whenever it presents itself. This type of investing is called opportunistic investing.

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This investing strategy, adopted by asset management mavens such as Alex von Furstenberg, seeks to yield the highest possible returns by seeking available investment opportunities at any given time regardless of self-imposed limitations or conventional investing algorithms. This is done by searching for potentially lucrative yet underperforming and currently depressed properties and acquiring them via a great deal of borrowed funds—a seeming imbalance which causes other investors to behave irrationally. After a short holding period, opportunistic investors take advantage of this momentum to sell the property at prices which yield at least 20 percent in profit.

Apart from the large yields, opportunistic investors also experience a low degree of volatility, making this approach one of the more stable paths toward investing success.

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Opportunistic investing is Alex von Furstenberg’s claim to fame in this extremely volatile industry. Find out more about his business practices at AlexVonFurstenberg.com.

Investment 101: Understanding investment vehicles

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Not all investment vehicles are created equal or work for one’s financial goals. Some provide steady income, but yield small returns on investments. Others may provide significant returns, but require a long-term investment commitment.

For investors, there is a wide variety of investment vehicles to choose from. Of the most popular are mutual funds, traditional IRAs, savings bonds or bond funds, Roth IRAs, and stocks.

Mutual funds

Mutual funds are invested in different securities which may include bonds, stocks, and/or money market securities. It is important to note that mutual funds differ from an investment trust, which issues shares in the company itself.

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Traditional IRA

This is a personal savings plan that gives tax advantages for savings retirement. Investments may include a variety of securities. Contributions in traditional IRA may be tax-deductible. However, earnings are not taxed until they are distributed. Risk levels under this type of asset vary according to the holdings in IRA.

Roth IRA

Roth IRA is another type of personal savings plan wherein the earnings that remained in the account are not taxed. Risks associated with this type of investment are relatively low.

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Bonds and bonds funds

These are also known as fixed-income securities because the income paid is fixed once the bond is sold. Bonds and bonds funds are usually invested in corporate or government debt obligations and are usually low-risk.

Stocks

Stocks represent a share of the company. As the company’s value rises or falls, so does the value of the stocks.

Alex von Furstenberg is an expert in investing. You can find more discussions on investment at this Twitter page.