Investing Strategies of the 1%
The wealthy do not simply plow their money into Amazon and Nvidia stock. They have a more sophisticated strategy. You can too.
If you're an Accredited Investor or Qualified Purchaser, a separate class of investments from the public markets can provide far more robust returns for less risk and reduced volatility.
Whereas retail investors might edge out an annualized 12% return with high volatility, private market strategies often consistently outpace those returns, with less volatility.??
More Impressive Returns for Less Volatility
For as many companies listed on a public stock exchange, a far greater number of companies have never gone public, and never plan to. Nonetheless, these private companies often allow investors to take a portion of their equity, or provide them funding (private debt / credit) in the private bond market.
With proper vetting and due diligence, accomplished through the right strategic partners that have sourced these opportunities and providing investment expertise for decades, an investor can actually achieve greater returns for less overall volatility.
Below is a short video I recorded discussing this.
Examples of Recent Offerings
What makes someone an "Accredited Investor" that can access these strategies, and why?
An individual is an "Accredited Investor" if they have:
An even higher status, Qualified Purchaser, is reserved for those with $5m+ of investable net worth or greater.
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This is dictated by the SEC.?
Must all my investments utilize private markets?
No. While private market strategies would be made available to you, you are never required to use any particular private market strategy available, and certainly can continue to embrace the public markets for all, most, or just a portion of your portfolio.?
By onboarding to a firm with a track record in this space, private market strategies simply become an additional investment class available to you, when or if you want to embrace them in your portfolio.
Many clients embrace a "new 60/40" approach whereby privates encompass 30-40 percent of their portfolio. Others embrace a 50/50 public-private split, while still other investors have private strategies comprise the majority of their portfolio. This will depend on your objectives, net worth, income sources, time horizon to retirement, risk tolerance, and illiquidity tolerance.
Why aren't more advisors offering this?
Lack of knowledge, background, acumen, skillset, and expertise.
What is the liquidity of these strategies?
Private market strategies include offerings that trade daily (like any public market investment), while others have quarterly redemptions (ability to enter and exit 4x / year), and then there are those with the greatest potential returns, which indeed ?may have illiquidity for one year, or even several years.
An investor is not required to use any particular private market strategy available. They simply become an additional investment class available to you, when or if you want to embrace them in your portfolio.
What's the major takeaway here?
First, this is not for everyone. Some people cannot let go of sticking to more limited offerings by managing their own money. Others "feel bad" leaving their long-time advisor with whom they have some sort of personal or family entanglement, but who does not have a track record in this space. They have yet to embrace their right to be selfish about maximizing their financial position, and putting their interests first.
However, there is a section of the investing public who quickly grasp how availing themselves of this additional investment class can provide them more robust returns for less overall volatility, and how that is valuable (in fact, compelling) to incorporate into their portfolio.
How can I learn more?
Message me on LinkedIn or book time in the link below. Please understand there will never be any pressure or sales tactics if we meet.