Why it pays to invest in fixed return investments

Investment certainty in an uncertain world

In this investment blog, I’ll be exploring an investment strategy that is becoming increasingly popular: fixed return investments. You’ll see that the concept is not a new one, learn about the advantages and why this year could be the one where you should increase exposure to fixed returns. I’ll also introduce you to a fixed return property investment, and tell you how you can take advantage of such opportunities when they become available.

Fixed return investments are old hat

Fixed return investments are not a new concept. Even so, the chances are that your financial advisor won’t have mentioned them. You may have heard of the term ‘structured investments’ or read about them in other investment blogs. These offer guaranteed returns but are underpinned by complex and risky derivative products like options and futures.

A few wealth management companies have been fined millions of pounds for misadvising their clients about structured products. They’ve not told them about the risks, and haven’t taken measures to ensure that the company backing the guarantee is solid. I’d steer clear of structured products, as I do with any financial investment that is complicated to understand.

Fixed return products are different to structured products. Think about cash savings accounts that guarantee 2% interest over a fixed period of five years, and you’ve got a fixed return product. Most government bonds are fixed return – you buy the bond at a price below its ‘par value’ and when they mature the government buys it back at par. The difference in price is your fixed return.

Companies, too, issue fixed return investments. They will sell bonds with a fixed income (interest) to bypass banks and raise cheap money. The buyers of the bonds (the investors) get a higher rate of interest than they would in a deposit account, and the company borrow money at a cheaper rate than it would when borrowing from a bank.

Why consider fixed return investments

When you invest, you do so to meet your financial goals. Over the last few years, we’ve witnessed how financial goals can be crushed by events beyond your control:

  • The Global Financial Crisis put the skids under almost every investment asset in the world. Over-leveraged property investors came to a cropper in the United States. Here in the UK, while the fall in property prices wasn’t so dramatic, anyone who had a stock portfolio saw their wealth almost halved overnight.
  • Just last year, the EU Referendum and Donald Trump’s election played havoc with stock markets and foreign exchange rates.
  • The collapse of the oil price has weighed on oil stocks, and swinging commodity prices raised blood pressures and reduced wealth.

This year could be as volatile as last year. In 2016, stock markets raced down 10% in the first few weeks of January and February and then ended the year at record highs. The pound fell around 15% in the few days after the vote for Brexit. Gold and silver traded in a near 20% price range. Panicked property investors first slashed prices and rushed to sell after the Brexit vote, then decided nothing much had changed.

In 2017, we’ve got to contend with the first year of a new president in the United States and the start of Brexit negotiations. As if this isn’t enough, there are major elections in France and Germany that could change the political map dramatically. And who knows what lies ahead in the Middle East, or what North Korea has planned for the Asia region?

I don’t know about you, but I can’t be dealing with the adrenaline rush of all this market volatility on a day-to-day basis. I want to know what my returns will be when I get them, and all in a hassle-free investment that allows me to sleep peacefully at night. Sounds too much to ask? Well, here’s what fixed return investments give you:

  • They remove the pain of market volatility
  • They provide certainty of returns to aid financial planning
  • They don’t need constant monitoring and adjustment

Now, if only there were a fixed return investment that gave more than a paltry 1% or 2%

Hotel room investments, the gilt-edged fixed return vehicle

I’ve recently become a big fan of hotel room investments. They’re similar to bonds issued by companies who want cheap money, insofar as the hotel management sell hotel rooms to investors rather than borrow money from a bank. They want to raise money to fund expansion and new services in line with their business plan.

If you buy a hotel room investment in a hotel that is run by an experienced management team, with a clearly defined business plan, you’re providing the money that will help it increase its revenues and profits more quickly, in a sector that is one of the fastest growing in the UK.

Such an investment is in an ongoing business with a track record, and because it is already producing profit, your income starts flowing the month after you invest. The last hotel room investment opportunity we offered our clients didn’t just give a fixed income, but a guaranteed capital gain, too. If you were too late to invest in this fixed return hotel room investment, you missed out on:

  • 8% per year income
  • A five-year fixed-term investment
  • A guaranteed 15% capital growth after five years

On top of all these benefits, these fixed return investments you don't need to arrange a mortgage – investments range between £50,000 and £100,000.

Want to know more about how to protect your financial future with solid returns?

Contact one of our team today on +44 (0)207 923 6100, and we’ll help you reap the benefits of fixed return property investments like hotel rooms. When we uncover prime hotel property investment opportunities, you’ll be the first to know.

Live with Passion

Brett Alegre-Wood