Why Pooled Mortgage Funds are Considered a Diversified Investment
There’s a popular saying in investing: “never put your eggs in one basket.” That in a nutshell is investment diversification. That is, you should never keep your money in just one asset class.
Diversifying your investment means spreading your investments across multiple asset classes. In that way, the risk of your investments is spread out. If one asset class fails to deliver, there would be other investments that will continue in growing your money.
Failing to diversify your investments is like planning to fail. Think of what happened to those who invested their life-savings on FTX.
Earn Passive Income With Our Pooled Mortgage Fund
Quarterly distributions
Minimum investment from just $10K
No lock-in investment term
It was the craze in the cryptocurrency market, until the truth behind FTX got exposed and its value crashed, wiping out people’s entire savings. This situation is something you definitely would want to avoid.
Diversify investments, but how?
While it’s easy to agree that investment diversification is crucial to sound risk management and investing success, the question some have is how exactly do you do it?
Sure, some financial guru can always tell you to invest a certain amount in stocks, bonds, real estate and even cryptocurrency. But the follow up question is which stocks exactly, or bonds, or cryptocurrencies should you buy? Not everyone has the time to research which of these asset classes to buy and hold, or sell in favour of buying another asset if need be.
Regarding real estate investments, not everyone has the capital to enter and invest in property. Not to mention, knowing which property to buy is also crucial.
These types of investments require expertise and experience. There’s a reason why 95% of retail day-traders fail. Understanding market movements isn’t easy and those that succeed have spent years refining their skills when it comes to reviewing and analysing industry trends.
A simpler way to achieve investment diversification
If learning about multiple asset classes seems overwhelming, don’t be discouraged because there are still ways to invest in a diversified portfolio. One of these ways is investing in a pooled mortgage fund.
Pooled funds have been increasing in popularity because they provide the benefits of investment diversification while also having a more accessible barrier to entry compared to other investments like real estate. Because pooled funds are passive investments, they are practical investment options for people who are time-poor and unable to monitor their portfolio regularly.
What is a pooled mortgage fund and what are its benefits?
As the name suggests, a pooled mortgage fund “pools” money from multiple investors. At APG, the fund is lent out to different borrowers looking for business finance and is secured by real estate assets.
Returns are based on the interest rates of the loans in the portfolio and investors receive them in the form of quarterly distributions. Below are some of the benefits when investing in APG’s pooled mortgage fund:
Investment diversification – Typically, there are around 30 loans in APG’s portfolio, all of which are secured by Australian real estate. This means that APG’s pooled mortgage fund provides instant investment diversification because the risk of your investment is spread across multiple loans. If one borrower defaults, the other loans will still be performing and delivering returns for the investors.
Moreover, because each loan in the portfolio is secured by property, APG will have means to liquidate the asset to recover the amount lent to a borrower that defaults. For a more detailed look on APG’s debt recovery process, check out our FAQ article “What happens when a borrower defaults?”
Passive Investment, passive income – APG’s experienced fund management team is responsible for conducting due diligence, sourcing borrowers and managing all the loans in the portfolio. Therefore, all the work is done by the fund management team. Investors simply wait for their distributions each quarter, which makes APG’s pooled mortgage fund a true, set-and-forget, passive investment.
In addition, investors may choose to receive their returns in the form of quarterly distributions. This option is great for those whose goal is to create an additional income stream without additional work.
For investors with longer term goals, they may opt to re-invest their distributions to compound their interest via the Distribution Reinvestment Plan (DRP). You may access APG’s compound interest calculator to compare regular distributions with compounding interest.
Lower barrier to entry – Investing in a pooled mortgage fund typically requires less capital compared to other popular investments such as paying the deposit and stamp duty of an investment property. At APG, the minimum investment for Retail investors is $10,000 while the minimum investment for Wholesale investors is $25,000.
Investors have the option to invest as an individual, joint individual, or as an entity such as a Trust, Company or SMSF.
Also, there is no minimum lock-in period when investing in APG’s pooled fund. In case an investor needs to access their funds, investors have the option to send a redemption request for full or partial redemptions which are processed quarterly.
If you have any questions regarding the APG’s pooled mortgage fund, feel free to contact the Investor Relations team at [email protected] or message us via our Contact Page.
This information in this article is of a general nature and does not constitute professional advice. You should always seek professional advice in relation to your particular circumstances.
If you have any questions about investing in private mortgages then please send us a message via our Contact Page.
