Wednesday, September 24, 2008

Why invest privately?

Why should you invest privately? Let me start by quoting a line from the movie "Wall Street":

"The public's out there throwing darts at a board"

When it comes to investing you have two options. You either invest in a publically traded stock or you invest into some type of private investment. Public stocks do not move up and down based on real solid fundamental business pratices and principals... it is all about trading and the trading happens based on news, speculation, insider deals etc etc. The stock market is vulnerable to many different things. You can invest in a solid profitable company and yet because of other worldy economical factors you can see that stock drop in value. Just take a look at what is happening now with US banks on the stock market.

Private investments are immune from the ridiculous emotional swings of the stock market. The value of a private investment IS based on solid fundamentals and real business practices. When you invest in a private company you are evaluating the company's business model. How long have they been around? Who is the management? How much money are they raising? What are they doing with the proceeds? What is their product? Who is the competition? How are they better faster cheaper etc? How is the investment structured? Will the company ever go public? These are the questions you are faced with when investing privately.

To give you an example of the power of private investments you need not look further then some of the biggest richest publically traded companies that were once private like Google, Microsoft, etc the list is endless. The best type of investment strucure for a private investment is usually a stock offering where you purchase shares in the company for 50 cents or $1 and then eventually the company goes public and the stock price climbs and climbs into double digits and well beyond. Wealth created from private placements and private offerings is huge. Most private investments are considered high risk high reward because of the liquidity issues that are associated with investing privately, but in reality risk is a relative term and it is up to you to do your own due dilligence and find a company that looks solid with a solid game plan moving forward.