Sunday, September 28, 2008

Private investments are not as risky as you think

Most people do not understand about investing into a private company. There is very little information about it, and it is still a relatively small practice. Once a potential investor has been made aware of the opportunity they often go on to the internet and begin to do research. Most of the information you find is misleading. It is mostly government websites or websites that are simply regurgetating the same thing. They all claim to that private investments are considered high-risk, mainly because you don't know if the management is telling the truth and or if they will deliver on their promises. Technicially the other factor is lack of liquidity. This is why trust in the company and a solid clear exit strategy are the 2 most important factors to determine if you will lose all your money or not. Competition, product, etc etc these are all things that factor how much money you stand to make... but without the first two criteria being strong none of the market conditions matter because the company never really gets in the game. So to simply classify all private investments as high risk is absurd. It is simply a different landscape to navigate and if you are illequipped then yes they are perilous waters. Most of North America's wealth was created from private investments. Companies made trillions in profit because they had a solid management and with a solid game plan and they gained the trust of investors and the general public. Those who put their trust in companies BEFORE they have proven it are always rewarded handsomely.


Online Marketer said...

The way economy is shaping up now (frozen & collapsed), it is hard to think about investments.

What is your opinion?

Mike said...

to online marketer - I agree it's hard to think about investing into the stock market - but there are private companies who will always be prospering no matter the current stock market conditions