Invest

Direct investments Investors bear these risks

Pinterest LinkedIn Tumblr

With direct investments, you become a co-owner of shipping containers, real estate or solar systems, for example. However, providers do not provide sufficient information about the possible risks that you are taking with them. What matters when it comes to direct investments.

The essentials in brief:

  • Providers are obliged to point out fluctuations in value, liability risks and your obligations as the owner in the sales prospectus. But that doesn’t always happen.
  • It is, therefore, not always clear to investors that direct investments have unique risks. You can lose all of your money with this type of investment.
  • Before making a purchase decision, find out about the potential risks and read the product information carefully.

With direct investments, you invest your money directly in real assets – for example, in solar systems, tree plantations, wind turbines, real estate or shipping containers (so-called grey capital market). Your investment will make you the full or partial owner.

HOW DOES A DIRECT INVESTMENT WORK?

As the owner, you acquire property that has already been rented. You rent or lease these for a period of time agreed in advance with your contractual partner and collected the monthly rental payments during this period. After the contract period has expired, you sell your shares again at an agreed residual value. You may not get back as much money as you spent on the purchase. But with the rental income, the investment should still pay off. Typical examples are:

Freight wagons or shipping containers:

With the direct investment, you become (part) owner of wagons or containers. Often these are already in use, for example when a logistics company uses them to transport goods.

Tree plantations:

With the direct investment, you become (part) owner of trees or forest areas. You have to pay for the rearing and further cultivation of the area and collect the sales proceeds from the upcoming harvest. The trees sold are said to bring you more money than the cost of buying the young trees and growing them.

Wind turbines :

With the direct investment, you become (part) owner of an active wind turbine or a group of wind turbines. However, such systems are expensive and take many years to refinance. With the direct investment, you regularly collect for the electricity fed into the grid that the wind turbines produce. It is similar when buying real estate whose rental income is to be paid out to you.

Liability Risks Are Often Not Adequately Explained

Direct investment advertisements like to emphasize how safe and sound such investments are and downplay the risks. An investigation by the market watchdog shows this. The risks arise, among other things, from the fact that you become a (co-) owner.

To be able to make the decision for or against a direct investment, providers must inform you in sales prospectuses of potential liability risks, obligations and fluctuations in value. However, the information documents often do not sufficiently point out the far-reaching risks and the obligations for owners – sometimes not at all.

RISKS: YOU COULD LOSE ALL OF YOUR MONEY

Direct investments often score with fixed payouts and manageable terms. However, as with any form of investment, direct investments are associated with risks. Up to a total loss, because you can lose all of your money with this form of investment. As an investor, you can also have various types of financial obligations:

  • If you become the owner of a forest property through a wood investment, there is a risk that you will suffer a total loss if the wood harvest is destroyed. As a property owner, however, you still have to pay for duties and taxes and possibly also for property maintenance.
  • Buyback by the provider is not guaranteed. Suppose the contractually stipulated buyback does not take place, for example in the case of a container because the company is insolvent. In that case, you as the investor must endeavour to sell it yourself. If you need a broker or agent for this, additional costs arise.
  • Suppose there is no income from your direct investment. In that case, you as the investor are still liable for the maintenance and care of the investment property: In the case of a tree plantation, for example, additional costs can arise from the use of staff to manage the property. Port fees may apply to containers.
  • The consequence of liability: As a (co-) owner, you may have to make payments that exceed the invested capital (obligation to make additional contributions).

P&R container firms go bankrupt

TIPS FOR DIRECT INVESTORS

Due to the risk of total failure and the long terms, this type of investment is usually only suitable for experienced investors. If you still want to invest in direct investments, you should consider the following tips:

  • Find out about the potential risks associated with your investment before investing in indirect investments. The independent advisors of the consumer advice centres will also help you with this.
  • Read the product information carefully.
  • Take the warnings in the sales prospectus and information sheets seriously. Get suspicious if there are no warnings at all.
  • Ask if anything is unclear.
  • Don’t sign anything you don’t understand.

Hello, I have been working as an investment consultant and author for more than 20 years. I love what I do and I have enriched everyone around me. A lot of money is not important, the main thing is how you use the money.

Write A Comment

  • bitcoinBitcoin (BTC) $ 21,526.00 7.98%
  • ethereumEthereum (ETH) $ 1,719.19 8.26%
  • tetherTether (USDT) $ 1.00 0.1%
  • usd-coinUSD Coin (USDC) $ 1.00 0.04%
  • bnbBNB (BNB) $ 286.06 5.9%
  • binance-usdBinance USD (BUSD) $ 1.00 0.06%
  • xrpXRP (XRP) $ 0.341561 9.54%
  • cardanoCardano (ADA) $ 0.471156 11.49%
  • solanaSolana (SOL) $ 37.45 8.45%
  • dogecoinDogecoin (DOGE) $ 0.070599 11.01%
  • polkadotPolkadot (DOT) $ 7.56 10.53%
  • shiba-inuShiba Inu (SHIB) $ 0.000014 4.47%
  • staked-etherLido Staked Ether (STETH) $ 1,668.87 8.31%
  • daiDai (DAI) $ 1.00 0.08%
  • avalanche-2Avalanche (AVAX) $ 22.95 9.72%
  • tronTRON (TRX) $ 0.065673 3.83%
  • matic-networkPolygon (MATIC) $ 0.802461 10.62%
  • wrapped-bitcoinWrapped Bitcoin (WBTC) $ 21,518.00 7.95%
  • leo-tokenLEO Token (LEO) $ 5.26 1.54%
  • ethereum-classicEthereum Classic (ETC) $ 35.85 13.82%
  • okbOKB (OKB) $ 18.90 9.75%
  • litecoinLitecoin (LTC) $ 55.31 9.18%
  • ftx-tokenFTX (FTT) $ 27.47 9.43%
  • nearNEAR Protocol (NEAR) $ 4.45 12.54%
  • chainlinkChainlink (LINK) $ 7.12 11.71%
  • uniswapUniswap (UNI) $ 7.13 9.67%
  • crypto-com-chainCronos (CRO) $ 0.127372 11.41%
  • cosmosCosmos Hub (ATOM) $ 10.91 7.65%
  • stellarStellar (XLM) $ 0.109666 9.35%
  • moneroMonero (XMR) $ 150.17 7.43%
  • flowFlow (FLOW) $ 2.29 15.78%
  • bitcoin-cashBitcoin Cash (BCH) $ 120.08 10.72%
  • algorandAlgorand (ALGO) $ 0.313427 9.24%
  • vechainVeChain (VET) $ 0.026623 9.5%
  • chain-2Chain (XCN) $ 0.088176 6.29%
  • filecoinFilecoin (FIL) $ 6.78 17.04%
  • apecoinApeCoin (APE) $ 5.37 14.24%
  • internet-computerInternet Computer (ICP) $ 6.52 11.47%
  • decentralandDecentraland (MANA) $ 0.865242 11.25%
  • the-sandboxThe Sandbox (SAND) $ 1.08 11.11%
  • hedera-hashgraphHedera (HBAR) $ 0.066904 9.61%
  • tezosTezos (XTZ) $ 1.64 11.62%
  • fraxFrax (FRAX) $ 0.999945 0.01%
  • quant-networkQuant (QNT) $ 102.08 8.99%
  • eosEOS (EOS) $ 1.33 9.19%
  • axie-infinityAxie Infinity (AXS) $ 14.84 12.7%
  • lido-daoLido DAO (LDO) $ 2.17 9.67%
  • theta-tokenTheta Network (THETA) $ 1.24 11.86%
  • elrond-erd-2Elrond (EGLD) $ 53.88 6.79%
  • aaveAave (AAVE) $ 87.74 11.24%