Monday, September 28, 2009

Private Placement Programs, How High are Yields?

Seemingly every day there are hundreds of more people learning about the private placement business, usually either through online research or word of mouth. Once an exclusive opportunity which was limited to just a few privileged individuals, the private placement business is now full of thousands of “professional brokers”. As you would expect, some of them are very successful, but the other 99% are not!
You may ask yourself, why are “private placement programs” growing so fast when it is such a tough business to succeed in? Well it’s unfortunately become the nature of most humans to chase the dollar, and claims of fast money. Let’s face it, if you’re rich, it is rather intriguing to consider something that can double your money every month, or “better”!!
With all of the recent hype about private placement programs, the most common question I have received over the last few years is:
I’ve heard of all kinds of programs out there, and I want to know, what returns are actually possible in REAL private placement programs?
Since this is such a frequent question and a critical topic to understand, we felt that an article explaining private placement yields was essential.
Below, we have listed different investment levels, and will explain what your opportunities, risks, and prospective yields could be if you found a REAL private placement trader.
Please note, this is not a solicitation or description of any programs associated with InsideTrade LLC. It is rather an explanation of information we have attained from reliable sources that have been successful in the private placement business. All returns shall be considered hypothetical, and for informational purposes only.
Various Investment Levels
1 Million: This is the level that most investors lose money, or have less than expected success. Whether it is because they fell for the “piggy back” program, “Bank of America” program, “PING” program, “Bullet” program, or the bank instrument/ proof of funds program, most are never successful. Though there are real programs at 1M, they do NOT trade bank instruments, and offer far lower returns.
10 Million: At this level, you may be able to find legitimate private placement programs, but your success depends on if the trader will accept such a small file. Sometimes there may be other larger files applying concurrently that you can be pooled with, but your yields won’t be as high as the larger file. In this case, at such a small level, it is still very tough to even be placed in a REAL bank instrument trading program. As you may know, bank instruments are cut in 100M+ increments, and even with a steep discount, you still need over 65M to purchase just one note.
50 Million: Usually at this level, you can find a trader that will combine your file with another concurrent applicant to meet the minimum needed to purchase a discounted bank instrument. Though this is possible, it is not guaranteed that you can enter into a program unless you find a REAL trader, who is happy to make an exception for you.
100 Million: At this level, the trader can purchase instruments with the line of credit that is drawn against the client’s collateral. Typically, traders can make spreads of about 7-15 points on each trade (ex. buy 65% of face value, sell at 72%). In addition, there is no need to combine the account with another client, since the client’s funds are sufficient to purchase the note alone. Needless to say, this dramatically increases your potential returns, and opens up opportunities for project funding and humanitarian developments.
As you may already know, there are many programs out there that may talk the talk, but when it comes to actually paying out, most of them disappear, or change the expected yields at the last minute. Though yields can be even higher for some opportunities, it is very unlikely that you will find a safe and stable program earning more profit than the numbers listed above.
Unfortunately, everyone knows that brokers run the business, and the traders “hide in the shadows” until the client’s information has been attained. For most desperate brokers, the goal is to attain as many files as possible. In having this goal, many brokers twist words and sugar coat information to get more applicants. As you can see, it is not uncommon to have inflated and unrealistic yields communicated to clients. In fact, it has become less common to speak with experienced brokers with reasonable yield expectations, than it is to speak with uneducated brokers with big promises.
Though it may be needless to repeat, be careful and use common sense when entering private placement transactions. Just like everything else, if it sounds too good to be true, it usually is.
InsideTrade LLC Staff
(412) 235-2855
Submitted by InsideTrade Staff on Saturday, 15 August 2009

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