Freedom Investment Club A Risk Worth Taking



The Freedom Investment Club (http://www.ficinvestors.com) started by a group of investment savvy individuals in Canada includes the FIC Canada, FIC US, FIC China, FIC RRSP, and FIC Income Fund. The RRSP and Income Fund are both quite new. It is difficult to say if any of these investment club programs are truly good investment opportunities compared to other options available. Some of the fundamental problems about these programs are as follows:

There is a $1000 buy in fee:
This is quite steep. They say this fee is much lower than the cost of mutual fund managers, but there are many no load/fee free funds out there, not to mention the abundance of emerging funds that can be easily traded on the stock market for a $10 trading fee.

The big lock down:
This is the real kicker. An individual investors money is tied up for three years. If withdrawn early, then none of the appreciation will be received if it can be withdrawn early at all.

There are more reputable funds out there:
These guys have been around less than 5 years. Not exactly a Warren Buffet approved establishment. Non experienced investors should look at finding a fund manager with a solid track record to manage investment funds. If nothing else, speak with a trusted financial advisor.

Control without control:
The club is about pooling money with other investors in order to purchase larger investment stakes. Like most shareholders, it does come with some voting rights. Remember, these are relatively uneducated investors being persuaded by the rather educated fund managers.

Lack of trust:
It is hard to trust that investment money is being handled wisely, when the direct managers of the fund are spending so much time doing their own marketing and sales. Not to mention that their marketing tactics during seminars were bordering on deceptive, and therefore presents a lack of trust for the management.

No dividends:
Not only are the funds held for three years, but it stated in the original offering that there would be no dividends given. This may be different for the Income Fund.

Sophisticated investors only in the US:
The program is very new in the United States, and thus it has not fully passed the SEC regulations. At this point, only sophisticated investors (those with $1 million dollar net worth, or $200,000 in annual gross income for each of the last 2 years, or $300,000 in gross annual income combined with spouse) are allowed to buy in. It seems these "sophisticated investors" have also chosen a portfolio which is 90% real estate.

The Risk of outstanding stock options:
Although investment money would be locked in, all of the management of the FIC hold sizeable amounts of stock options which are exercisable at very low prices at any time from now until October, 2007. This means that investment money is locked away, unable to be touched, in theory the club mangers could dump the value of the stock by exercising all of their options. Not that they would, but it has been done before.

Of course, if you are truly interested in the FIC, you should do your own research, and draw your own conclusions. Including getting a copy of the offering memorandum before signing on the bottom line.





Freedom Investment Club A Risk Worth Taking