Hi there! If you’re reading this article, then that must be because you want to learn of Private Equity. There are a wide variety of places that you can invest your money and one option is to put it into private equity. This type of investment is something of a specialist investment and tends to be limited to professionals who do this for a living rather than to the average investor.
Nevertheless there are ways that the average investor can get involved in private equity investing, usually through a mutual fund. There are good reasons to invest in private equity the biggest being the growth potential of the companies involved. However there is also a great deal of risk which is why private equity tends to be limited to professional investors, it takes a lot of experience to know where to put your money.
Private equity is simply investing in a company that isn’t publicly traded, there are a number of ways that this can be done. Most common forms of private equity would be things like a leveraged buyout, in which a private investor buys control of an existing company or venture capital where the investor puts his money into the early stages of a new company. There are many other forms of private equity but they are all basically the same, money is invested in a company that is not traded on a stock exchange.
For most investors private equity isn’t really all that practical an option. The biggest problem is finding places to invest. In the absence of a central stock exchange in order to invest in private equity a great deal of research and a number of contacts are needed simply to find companies to invest in. Once you have found a company that may be worth investing in there is still a great deal of research that needs to be done in order to decide whether or not it is a good investment.
Since private companies aren’t required to make financial information available publicly this can be a problem. In addition private equity investing requires a great deal of capital since most companies are looking for large sums of money. The best way for the average investor to get involved is to invest in a private equity fund.
The reason that an investor would want to put money into private equity is that the companies at this stage of their development are likely to grow at a much faster rate than a company that is publicly traded would. That means that potentially there is a lot more money to be made investing in private equity. Of course there is also a lot more risk since a lot of these companies will fail.
This is especially true of something like venture capital where the investment is made early in the companies existence. Many of these companies will fail and the entire investment will be lost. However the ones that do succeed will pay off spectacularly and that is what pays for all of the failure.