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November 29, 2012
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Investing

:iconsvenler:
Svenler Featured By Owner Nov 29, 2012  Professional Photographer
A lof of people know about investing in the stock market, CDs, or government bonds. But there are other ways to invest, such as angel investing, most of which are heavily regulated by government, essentially prohibiting people to do what they want with their money.

Most forms of investment such as angel investing and seeding require someone to be an accredited investor. That means one has to have a net worth of at least $1m (excluding primary residence) or have an income of at least $200k for at least the previous two years and good reason to believe that one's income won't fall below that threshold in the current year.

Most companies profiting from the common types of investment are comparatively large and already established companies or the government itself. Most companies that would profit from the investments that require someone to be an accredited investor are small and local companies that need to raise funds. If these companies can not raise the needed funds through investors, they have to rely on loans, which is a more costly process.

Yes, it is still theoretically possible to invest in small companies without being an accredited investor, but the chances and opportunities are small and far in between and mostly require connections.

What is your take on it? Do you think that a government should have a right to tell you how you may invest your money?
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Devious Comments

:iconlytrigian:
Lytrigian Featured By Owner Nov 29, 2012  Hobbyist Writer
Those laws don't exist to restrict investors; they exist to protect individuals from being induced to put their money into very risky investments where they cannot afford the loss.

If you want to be an angel investor and cannot qualify on your own, you can always join an angel group.
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:iconsvenler:
Svenler Featured By Owner Nov 30, 2012  Professional Photographer
Neither of this was question. The question was if government should have the right to tell people what they are allowed to do with their money. The stock market is risky too, but the government doesn't seem to have an issue with people investing there.

And no, you can not not join an angel group without being a accredited investor.
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:iconlytrigian:
Lytrigian Featured By Owner Nov 30, 2012  Hobbyist Writer
There's risk and then there's risk, and the stock market is also HEAVILY regulated.
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:iconsvenler:
Svenler Featured By Owner Nov 30, 2012  Professional Photographer
If you want to make an argument why you believe that the government should decide what people are to with the money they earned, please do so, but do it directly and not with those "there's risk and then there's risk" answers.
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:iconlytrigian:
Lytrigian Featured By Owner Nov 30, 2012  Hobbyist Writer
You don't acknowledge that the risks in investing in a publicly traded company are extremely mitigated compared to a startup? That in private transactions you can have shenanigans that are not possible -- or more difficult to pull off -- than in public ones? That potential investors who lack significant resources of their own are not in a strong position to either protect themselves well or recoup their losses under those circumstances?

Fine. These laws have been on the books for decades. Write your legislator and try to get them changed, if you think they're unnecessary and intrusive.
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:iconsvenler:
Svenler Featured By Owner Nov 30, 2012  Professional Photographer
Don't argue against something I never said. Instead, argue for your point.
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:iconhgwizard:
HGWizard Featured By Owner Nov 29, 2012  Hobbyist Artist
I've only recently begun to get into the wild and crazy world of investing.

What is an Angel investment exactly? How does that differ from a Stock, CD or a Bond?
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:iconsvenler:
Svenler Featured By Owner Nov 29, 2012  Professional Photographer
Angel investing is investing in start-up companies to provide them with the required funds, so they don't have to take a bank or government loan. In return for the investment, the investor either receives equity in the company or convertible bonds.
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:iconhgwizard:
HGWizard Featured By Owner Nov 29, 2012  Hobbyist Artist
Oh nice, I didn't know there was a special term for that!
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:iconragerancher:
Ragerancher Featured By Owner Nov 29, 2012
If my understand is correct, angel investing is like Dragons Den. You pitch your idea directly to individuals and get direct investment in your company in exchange for a stake in it.
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:iconcrotale:
Crotale Featured By Owner Nov 29, 2012
The federal rules simply provide a mechanic for government to track and tax these financial transactions, since there are no middle men (re: banks) in the process. But yes, angel investing normally provides eight to ten times the funding over traditional venture capitalists in the US. As with the new regulations on crowd investing, these rule and regulations are intended to protect the investors, but I also question this route of control.
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:iconsnuffles11:
snuffles11 Featured By Owner Nov 29, 2012  Hobbyist General Artist
I don't know enough about business or investment to have an educated opinion on this particular point. The most I've ever done is have a 5 year CD pay off nicely just before college. I'm also thinking of a money-market account at the Credit Union, but I'm fairly sure that's not really what we're talking about.
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:iconabstract-mindser:
Abstract-Mindser Featured By Owner Nov 29, 2012
This would be an issue if I didn't feel that the stock exchange should be closed indefinitely.
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:iconsvenler:
Svenler Featured By Owner Nov 29, 2012  Professional Photographer
Why do you believe that it should be closed?
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:iconabstract-mindser:
Abstract-Mindser Featured By Owner Nov 29, 2012
I feel that it has created much to far a gap between the consumer and the company. In order to be heard by a company you either have to be a widescale effort or a mindless yes man, and sell your soul to the company.

Also, it has allowed for the formation of many a monopoly.
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:iconsvenler:
Svenler Featured By Owner Nov 29, 2012  Professional Photographer
So you would outlaw something because you "feel" it is a certain way that you do not approve of?
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:iconabstract-mindser:
Abstract-Mindser Featured By Owner Nov 29, 2012
Of course not. I would build a case to bring evidence to conclude that the Stock Market has done more damage than good to the common consumer; as I feel that most corporate entities are undeserved of their overt fortune.
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:iconsvenler:
Svenler Featured By Owner Nov 29, 2012  Professional Photographer
Don't you find it intellectually dishonest to try to prove a theory you already made up your mind about instead of first researching what the implications might be and then making up your mind?
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:iconabstract-mindser:
Abstract-Mindser Featured By Owner Nov 29, 2012
No, as I'm not trying to prove theory, I'm trying to prove damages. An inspection of the splintered and rotted beams that the landlord has been keeping from the state.
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:iconsvenler:
Svenler Featured By Owner Nov 29, 2012  Professional Photographer
"No, as I'm not trying to prove theory, I'm trying to prove damages."

Your theory is that there is a net damage, which is what you are trying to prove.

If you would have said that you wish to evaluate the impact of the stock market on the consumer and make a decision based on your findings, I would have applauded you.
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(1 Reply)
:icontbschemer:
TBSchemer Featured By Owner Nov 29, 2012
It's a more efficient form of financing.
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:iconabstract-mindser:
Abstract-Mindser Featured By Owner Nov 29, 2012
The same way that developing a law outside the public eye is.
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:icontbschemer:
TBSchemer Featured By Owner Nov 29, 2012
How so? Stock markets make investment available to the average person.
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:iconouroboroscobra:
OuroborosCobra Featured By Owner Nov 29, 2012
This might be an issue I would care more about if I knew what "angel investing" was.

Government regulation on investment can be a good thing, such as to prevent pyramid schemes.
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:iconironhold:
Ironhold Featured By Owner Nov 29, 2012
In a nutshell?

An "angel" investor is a person who looks for people and small ventures who have business plans but who need financing.

If the investor likes what they see, then they offer money to help finance the plan. In exchange, the investor gets something in return, such as a repayment of their money with interest (as with a loan), a set share of profits, and/or a seat on the board.


For example, say that you want to open an ethnic grocery store in an area that's considered to be a "food desert" (re: no easy, consistent access to food). You need $20K to open the place. Thing is, your credit is shaky after a previous venture didn't go as planned, and so you can't get a loan from a bank. An angel investor might then step in to foot the cash.


On one hand, angel investors help provide money to finance ventures that banks and other, more traditional outlets wouldn't generally touch.

On the other hand, some angel investors are focused on the repayment rather than on developing the business plan, and so push the company to either go public or be sold off, perhaps too soon.
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:icontbschemer:
TBSchemer Featured By Owner Nov 29, 2012
Comments like this make me hyperventilate like a sci-fi geek who just discovered that his friend never saw Star Wars because he heard it sucked.

An angel investor is someone who has a lot of money and is searching for someone with a good business idea to invest in. There are really only 4 ways to finance a new business:

1. Self-financing. Not a good option for people who actually need to work to support themselves.
2. Angel investing is when someone else likes your idea and decides to invest in you, while leaving you most of the ownership rights. This money comes with the fewest strings attached, but is the hardest to find, and is often severely discouraged by government involvement.
3. Venture capital is an investment from a company that invests in fast-growth start-ups purely to get a financial return on their investment. The price of this money is usually giving the venture capital firm a 30-40% ownership stake in your company until they sell their assets with the expectation of a profit.
4. Government investment. This happens either through the Small Business Administration or through direct grant legislation. This money is usually only available to companies that sound really good to the politicians. The more money the government is spending on start-ups, the less angel investors feel like they need to spend. This is called the "crowding out" effect.

Basically, angel investment is the entire reason why you shouldn't tax away all the money made by the rich. When they have less money, they have less to invest.
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:iconabcat:
AbCat Featured By Owner Nov 29, 2012   Writer
You can invest in my publishing company if you like. =p
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:iconsvenler:
Svenler Featured By Owner Nov 29, 2012  Professional Photographer
Do you have a business plan?
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:iconabcat:
AbCat Featured By Owner Nov 29, 2012   Writer
Nope. =p
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