Invest in Others' Projects vs Have Your Own Projects

[Elle Bi]

Could you please give some inputs on the pros and cons of two types of investment opportunities and which one is a better choice overall?:

• 1.Invest in other investment companies’ projects, you got 18%-26% return on the investment.

• 2.Find your own property and then look for investors/partners for this project (if you don’t have enough capital).

The risk of Type 1 is to lose your initial investment, but the investment company seems pretty robust and has good credibility. The cons of type 2 is you have to do everything to ensure the project is going right and of course you are in control of everything. Any other risks of both types I should be aware of?

I also heard if you are new to the game, it is better you do Type 1 first so you will have something on your profile to establish your credibility.

So what is the best strategy: Do Type 1? Do both? Do just Type 2?

[Andrew Johnson]

@Elle Bi Maybe a few thoughts:

1.) You'll never get a risk-free 26%.  I'd posit you'll never get a risk-free 18%.  Not all of these kinds of projects have (or will) pan out.  Otherwise you'd never have anyone buy bonds, you'd just throw your money into something with a 26% return into a sub-2% return.  

2.) Becoming an investor (i.e. passive) might not do anything to help establish your credibility.  I'm a limited partner in a round that a venture capital company raised, it doesn't mean that I'm qualified to be a VC.  If I buy Apple stock it doesn't mean that I'm now an expert on mobile technology and you should invest with me if I found a smartphone company.  Active is active and passive is passive.

3.) You have to decide where you want to be in 5, 10, 20 years.  If you want to be active then the "feet wetting" could be the proverbial house-hacking that's a favorite around here.  The down payments are low, you get to be a lovely property manager, you can start building actual financials, all sorts of fun stuff.