Why Pooled Mortgage Funds Might Be a Viable Option When Starting Out
Investing with a small starting capital can be daunting. While most people would love to have their money grow exponentially really quickly, the reality is that it takes longer to grow a small starting capital.
However, taking longer doesn’t mean it’s impossible. With the right approach, even a modest sum can meet your investment goals. You just need to be clear about what your investment goals are and then combine them with the appropriate risk management strategy.
In this article, we’ll explore sound investment principles that can be used by individuals with limited capital and then go over how a pooled mortgage investment fund stacks up against these criteria.
Earn Passive Income With Our Pooled Mortgage Fund
Quarterly distributions
Minimum investment from just $10K
No lock-in investment term
First Investment Principle: Diversification
Diversification is a fundamental principle of investing, and it’s especially important when working with a small capital. By spreading your investment across different asset classes, industries, and geographic regions, you can reduce the risk of significant losses.
Second Investment Principle: Watch out for the fees
When investing with a small starting capital it becomes even more important to be mindful of the fees involved. For instance, high-cost trading platforms and brokerages as well as entry and exit fees can eat into your returns quickly.
Third Investment Principle: Slowly add to your investment
Although you may not have a lot of cash to invest right now, you still have the option to add to your investments over time. Allocate a small portion of your income and add it to your investment regularly. You can also reinvest your returns to compound the return
Fourth Investment Principle: Think long-term
When starting with a small capital, focusing on long-term gain is essential. Going for high-reward speculative investments can be tempting, especially if you’re seeing 300, 400, or 500 percent returns. But keep in mind that speculative investments can also mean blowing your entire account just as quickly. Higher rewards always entail higher risk.
How does APG’s pooled mortgage fund stack up to these investment principles?
A pooled mortgage fund is a fund that pools money from individual investors and then lent out to borrowers in the form of a mortgage. As borrowers pay back their loan, investors earn profits from interest.
While mortgage funds may differ in the types of loans they provide, typically, the loans in a pooled fund’s portfolio are secured loans.
In the case of Active Property Group’s pooled mortgage fund, all loans in our portfolio are commercial loans secured by Australian real estate. Therefore, if a borrower defaults, APG has the right to liquidate the property used as collateral to recover the amount lent out.
APG’s Pooled Fund is a Diverse Fund
Aside from loan recovery measures as part of risk management, APG’s loan portfolio also has an average of 30 active loans at any given time. This means that the risk to the investor is spread across multiple loans. Even if one borrower defaults, other loans are still performing and generating profits for the investor.
Hence, APG’s pooled mortgage investment fund satisfies the first principle of investment diversification to mitigate risk and to protect your capital.
APG’s pooled fund has no hidden fees
When reviewing investment funds, the most common fees to watch out for are the following:
- Application fee
- Management fee
- Performance fee
- Custodial fee
- Legal and accounting fees
- Redemption fee
At APG, we don’t charge any of those fees. All advertised returns are net of fees other than a 0.5% Retail Investor Fee.
A Retail Investor fee is charged because our retail fund is operated by an independent Trustee, Primary Securities Ltd, and the Retail fee goes directly to them. Primary Securities oversees the activities of the Fund and ensures that APG is acting in the best interests of the investors at all times.
This means that when the quarterly distribution is announced, retail investors only need to subtract 0.5% from the quarterly return to calculate their return for the quarter. For example, if the announced quarterly distribution is 10%, the return for retail investors is 9.5%.
APG’s pooled fund allows you to add to your investment via the Distribution Reinvestment Plan (DRP)
The third investment principle recommends slowly adding to your investment to gradually improve your returns over time. However, people who aren’t too liquid may find it difficult to consistently allocate a portion of their monthly budget to their investments.
The Distribution Reinvestment Plan or DRP helps solve this problem by automatically reinvesting your returns back to your account. Even when the budget is tight for a particular month (e.g. tax month), DRP allows investors to consistently add to their investment and compound their interest over time.
Some of APG’s investors who use DRP opt to still manually add in to their investments when they can to further boost their potential returns and speed up the growth of their investment.
Therefore, DRP also satisfies the fourth principle, which is to think long-term. By compounding your interest for a longer period, the greater impact to your investment’s growth.
What is the minimum investment of APG’s pooled mortgage fund?
APG’s pooled mortgage fund is open to both retail and wholesale investors. The minimum investment for retail investors is $10,000, while the minimum investment for wholesale investors is $25,000.
There is no lock-in period for investments. Instead, we offer withdrawals or redemptions on a quarterly basis. Should you need to make a partial or full redemption, an investor only needs to submit a redemption request three weeks prior to the end of the quarter.
The reason why we have this timeline is because APG’s funds are used to finance business and development loans with loan terms generally lasting from 6-12 months.
We can’t just have to wait until we receive funds back from the borrowers in order to pay redemptions, so having redemption requests three weeks prior to the end of the quarter gives us the best chance to raise the amount needed to cover for all redemption requests within that period.
To learn more about the application process, you may want to check out our FAQ article: “How to get started investing with APG?”
If you have any questions about APG’s pooled mortgage fund, you may contact our Investor Relations team and they will gladly answer any queries you may have.
This information is of a general nature and does not constitute professional advice. You should always seek professional advice in relation to your particular circumstances. The returns mentioned are not guaranteed. You risk losing some or all of your investment.
If you have any questions about investing in private mortgages then please send us a message via our Contact Page.
