Private Equity

One of the oldest forms of investing is back in a big way. In the days before stock markets ruled the world private equity was the way that most companies raised money. In the last few years it has started to become very popular again as a lot of people shy away from the stock market. In general private equity investing is limited to those with a large net worth but there are ways for smaller investors to get involved.

Private equity investing is basically putting your money into companies that aren't traded publicly. Almost all companies need to raise money and there are a variety of ways that they can do it. Going public is just one of them. There are lots of good reasons for a company to remain private. The biggest is that it gives management more control. There is also a lot less regulation. Investing in companies that are privately held can be a very profitable endeavour. If you know what you are doing. In most cases private equity investing is done by specialists and not by the average investor.

The advantage of private equity investing is that you can potentially make a lot more money than you could with a publicly traded company. In most cases you would be investing in companies which are fairly early in there development and still have lots of room left to grow. On the other hand it also means that it is far more likely that the company will fail. Given this the basic strategy with private equity investing is to put relatively small amounts into a lot of different companies, knowing that you will lose money in most cases. The hope is that this will be offset by the profits of the successful companies.

In most cases private equity investing isn't for the average investor. The main reason is the large sums of money involved. In most cases the investments being made in these companies are in the hundreds of thousands or even millions of dollars. Clearly it requires deep pockets to get involved. The other reason is that you need to know where to find companies to invest in. This requires that you have a lot of contacts in the business world. Something the average investor is usually lacking.

In recent years however it has started to become more and more common for private equity funds to allow the average investor the chance to get involved in this part of the market. These are basically like mutual funds except that they invest in private companies rather than in stocks. Because of the risks involved these funds usually only accept investors with a fairly large net worth. In most cases a fairly large investment will be required as well. This can be an excellent way to diversify your portfolio but you really do have to do some research to make sure that this is a good option for you.