Here at Avantis Wealth, we have come to believe there are ‘red lines’ that shouldn’t be crossed.
These can be critical in determining whether an investment option raises signs of concern or shining beacons that indicate great potential for investors.
It’s important to note that an individual negative result won’t necessarily be a deal-breaker but would require exceptional positive elements in other areas to pass our selection process.
The longer money is invested in one project, the greater the risk of market forces or the economic situation changing. Too much can change in this fast-moving world we live in and as such, we don’t generally favour projects of 5 years or longer.
As we’ve seen in the past, emerging markets offer a risk level that is rarely balanced by the reward. We therefore typically avoid these.
Some countries have a history of instability which could lead to changes in government, taxes, import and export tariffs, economic growth or decline. And in extreme cases, terrorism or civil war. These we avoid at all cost!
Investments that can be impacted by the elements - fire, water, insects, wind, bacteria - carry a high risk. This puts investments like ‘green oil’ on the backburner.
Chemicals, oil, nuclear power, major dams and the like can be a major concern for environmental problems. These are aspects we tend to avoid.
Companies with a successful track record have a large part to play in ensuring the success of an investment. Those that have ‘done it before’ - borrowing money from investors for similar projects and paid it back.
Business models that show highly profitable returns are high on the list of appeal. Put simply, if the investment provider is making good money, investors rarely have to worry about their returns. We also favour business models that have nothing new - it’s all been done before, preferably many times. Which means no surprises!
If you are like most investors, you are either looking to grow capital for the future or looking to create an income stream to support your lifestyle now. For the last 20 years, the mainstream financial market has failed to deliver decent returns.