Wednesday, December 22, 2010

Where Are the Banks Investing Their Money? by Ravinder Tulsiani

Banks are considered conservative in nature, very few banks go bankrupt, they make millions... right! Would you say that they have a successful business model? If so, let's look at what they invest their money in... is it stocks? Mutual funds or GICs? No, they are in the business of lending money!

Just ask yourself, would the bank lend you 100% money to invest in the stock market or mutual funds secured only by the investment you purchased? Try this... tell the bank that you will take 100% of the money borrowed and invest it back into their own bank stock, would they lend you the money? Absolutely not, unless you secure it against your house or other suitable collateral. Why? Because it is a poor collateral!

Banks are conservative in nature and will have no problem lending you money against Real Estate! Why, because the banks know that real estate is one of the best collateral out there... it's more stable than the stock market and it's a hard asset.

The banks spend a lot of money convincing the general public that they should invest their hard earned money into GICs, mutual funds or stocks... but they focus on investing and making millions through lending against real estate. Look at what they do, not what they tell you to do!

So, let's go back to risk in real estate... yes there is risk, but if you do it right, it can be a very conservative investment and very profitable...

About the Author:
Ravinder Tulsiani is a published author who has written about personal finance, real estate, self-help and online marketing.