Tired of measly yields, but wary of too much risk? Consider a mortgage pool instead of a CD. - July 30, 2009

Have jangled nerves prompted you to move money from stocks and bonds into Certificates of Deposit (CDs) or Money Market Accounts (MMAs)? If so, you’re not alone. But, like most people who’ve parked money for safekeeping into an FDIC-insured account, you may be frustrated by yields that have virtually no hope of beating inflation. CDs and MMAs are virtually risk-free, but, at current interest rates, yields are nearly zero. With inflation expected to increase over the next several years, these investments are actually all-but-guaranteed to lose value when adjusted for inflation.

If you’re ready to put some of your funds back to work in a higher-performing investment — but are justifiably nervous about tilting too heavily towards Wall Street investments — Sterling Pacific Financial’s mortgage pools might be just the kind of alternative you need.

Secured by real estate, the trust deed investments of Sterling’s mortgage pools are relatively low risk (since foreclosure and sale of the underlying property is always an option in the case of borrower default). But, since we’re focused entirely on meeting funding short-term funding needs that are not well-served by banks, we can deliver a much higher rate of return to our investors than typical bank interest rates.

From the beginning of 2005 through June 1st, 2009 Sterling’s mortgage pools (Foundation Fund, LLC and First Floor Fund, LLC) have produced a return of 10.6% to 11.5% on average over this period.

For a conservative and easily calculated comparison versus CDs, we could say Sterling’s mortgage pools have consistently averaged 10% since inception — and are on track to continue to do so for the next several years.

What does this mean for an investor today? An investor who puts $100,000 in one of Sterling’s mortgage pools could earn a return on their investment (ROI) of $10,471.31 (10.47% compounded annual yield), versus a 1 Year CD ROI of $1,889.16 (1.89%); 3 Year CD ROI of $2,443.96 (2.44%); 5 Year CD ROI of $3,008.71 (3.01%).

While CDs are typically FDIC-insured — making them virtually risk free — the risk associated with Sterling’s mortgage pools compares very favorably with other uninsured investment choices. Not only are each of Sterling’s trust deed investments secured by real property, our mortgage pools spread each investor’s participation across all the loans in the pool, providing built-in diversification.

Bottom liine: Sterling’s mortgage pools provide a sound investment alternative to CDs and MMAs by offering risk averse investors significantly better yields without greatly increased risk.

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