Learn how to reinforce your income in uncertain times

Seven Principles of Investment - No.6: Underpin your investment with security


Investors often ask if an investment opportunity is ‘secured’. Their expectation is that if it is, then their investment is protected from loss. We are great believers in bringing security to all investments where it is feasible. In my view, security is a really positive addition, but should not be assumed to offer perfect protection.

Here are a few essential opinions that I hold about the provision of ‘security’.

Any security is better than no security.

A first legal charge over UK property is the best that can be achieved. Provided that valuations are carefully done, and the amount lent is restricted to a maximum of (say) 70% of the value, then an investors capital is probably fully protected.

There are many different types of security, for example:

  • First legal charge over property,
  • second legal charge over property,
  • personal guarantee, corporate guarantee,
  • Debenture over company assets,
  • Charge over other valuable assets like planes, cars, fine art
  • Charges over intellectual property such as patents, royalties, brand names etc.

In general, our experience is that the lower the quality of security, the higher the investment return that is required to attract investors. Judging the risk/return ratio is a key necessity for all investors.

Security may be held by a security trustee on behalf of all investors, or individually by each investor. Each method has pro’s and con’s, we are always willing to explain the detail.

Having security in place does not mean that all your capital and interest due is protected. Maybe all the capital is protected, perhaps a part is protected. But you are unlikely to lose all your capital in the event of business failure. On the other hand, it is equally important to realise that if there is no security in place, it doesn’t automatically mean you would lose all your capital in the event of business failure. You may get back all, some or none of your capital. There is, in my opinion, a higher risk of losing more money if there is no security in place, but for some investments, this may be a risk worth taking!

Sometimes it is the company receiving investment that holds the security. For example, a bridging finance company will usually take property as security from the borrower. Investors who have provided the finance to enable the lending to take place may rely on the protection taken from borrowers as satisfactory.

In other cases, the investment itself is security. For example, if you purchase gold bullion and take physical delivery. ‘Security’ for your investment is the value of the gold. The value may fluctuate, but providing you are not forced to sell, you can pick your time to realise yourinvestment at a profit.

For many investments, including the bulk of regulated investments like shares, there is no security at all! Moving from a ‘no security’ position to one which is better but maybe not perfect, may still be a hugely positive move.

Finally, I return to the beginning and say that having security is far better than having no security. Learning more about security will enable you to make better investment decisions.


Read about all 7 principles of investment by downloading our report. The report equips you with the knowledge of how to improve your chances of success and make the most of your investment portfolio.

More relevent Articles



Latest Insights

R Etirement 3b

How to build income and wealth for retirement 3b: Getting the best from different investment classes through quoted bonds and gilts

In this part of the series we examine if quoted bonds and gilts could work to help build a pensionable income

R Etirement 3c

How to build income and wealth for retirement 3c: Getting the best from different investment classes through day trading

In this part of the series we examine if day trading could work to help build a pensionable income

R Etirmeent 3d

How to build income and wealth for retirement 3d: Getting the best from different investment classes through unquoted bonds and loan notes

In this part of the series we examine if unquoted bonds and gilts could work to help build a pensionable income

Current Investments

Register to Invest

All investments have all gone through a stringent 3-phase due-diligence process that is available for your evaluation and is available to qualified investors only
Qualified Investors Only

TALK TO OUR INVESTMENT TEAM

Investment decisions can be complicated. At Avantis, we are here to help you understand the investments that are presented to you. By understanding more about your investment goals, we can give access to opportunities that can achieve these goals.
+44 1273 447 299
invest@avantiswealth.com
8 The Drive, Hove, East Sussex, BN3 3JA
I consent to be contacted via telephone and/or email and i consent to my data being stored by avantis wealth to comply with european gdpr regulation.

Register for Investment Access

All the details and downloadable documents are available through the investment portal.
Register

Disclaimer

Your capital is at risk. The value of your investment may go up as well as down. Past performance does not indicate future performance. There is no right for compensation in respect of poor investment performance and your investment is not covered by the UK FSCS. Avantis Wealth Ltd is not licensed or regulated by the Financial Conduct Authority and does not provide financial advice. The content of any promotion has not been approved by an authorised person within the meaning of the Financial Services and Markets Act 2000. Reliance on this promotion for the purpose of engaging in any investment activity may expose the investor to a significant risk of losing all of the capital invested. [Article 48(4) Financial Services and Markets Act 2000 (Financial Promotion) Order 2005] Please note that as a responsible company we require the self-certification of either a High Net Worth Investor or Sophisticated Investor statement prior to issuing any detailed information by way of an Investment Memorandum. Investors are not charged any fees when placing an investment through Avantis Wealth Ltd.