Subscribing to the adage, “give a man a fish and he will eat for a day, teach a man how to fish and he will eat for a lifetime,” Financial Poise offers its audience objective and plain English education about investing. If you are looking for recommendations on particular stocks or looking to make a quick buck trading, you came to the wrong place. Financial Poise teaches investors about the fundamentals of investing for the long term.
Whereas crowdfunding can be thought of as a primary market, a pre-IPO market is a secondary market. Stated another way, crowdfunding involves the sale of restricted securities by the issuer of such securities whereas a pre-IPO market is one where a holder of restricted securities can sell them to a third party.
U.S. farm real estate retained its value over the decade 2000 to 2010, despite the housing market’s tumble [see charts below]. In fact, the average value of land and buildings on farms has steadily increased since the late 1980s, with the sole exception of 2009.
The average investment made by an angel investor in a startup venture is about $37,000. Angel investors expect an average 26 percent annual return at the time they invest. If they do more than a couple of angel deals, they believe that one-third of their angel investments will result in substantial capital losses.
A study by three authors at the University of Oxford (UK), published in February 2013, concluded that investors in new PE funds “should be extremely wary of basing investment decisions on the [reported] returns…of the current fund.”
In his book Private Capital Markets (Wiley, 2011), Rob Slee recognizes five stages of company growth, from an investment perspective: (1) seed, (2) startup, (3) early, (4) expansion, and (5) later or mature. This is not the only way to define the stages of a private company, but it’s the most useful for our purposes at AIMkts. The following table shows how we loosely define them, along with the investors who align with each stage. Below the table are further explanations.
According to U.S. securities law, only accredited investors may invest in private equity, venture capital, hedge funds, and private placements. Regulation D, Rule 501 of the Securities Act of 1933 states the accredited investor definition as: (a) an individual (or married couple) whose (joint) net worth exceeds $1 million, excluding the value of the primary residence; or
Individuals invest in tangible assets (also called hard assets) because they are generally considered more stable in value than most commonly traded sovereign currencies and securities. When the world economy falters, many investors move into tangible assets, such as gold, because they are perceived as safe havens during difficult economic times.
Calculating Risk Adjusted Return is not simple. It involves making assumptions about a risk-free rate of return, selecting portfolio and market benchmarks, figuring the standard deviation of return, and/or using “beta” (a separately calculated figure that describes the tendency of an investment to respond to marketplace swings). Unless you’re a financial analyst, you might think that’s more than you need to know. But for those who are still curious, I’ll provide an simplified explanation, and then give you some resources for studying RAR further.
A venture capital fund is a professionally managed pool of capital that is raised from public and private pension funds, endowments, foundations, banks, insurance companies, corporations, and wealthy families and individuals. Venture capitalists (VCs) generally invest in companies with high growth potential that have a realistic exit scenario within five to seven years.
A concise definition of hedge fund is elusive. It is more useful to study various successful hedge funds and their strategies than try to roll them up into a singular definition. Start by studying A.W. Jones & Co. from the 1960s; then Steinhardt, Fine, Berkowitz in the sluggish 1970s; then George Soros’s bank-breaking Quantum Fund and Julian Robertson’s swashbuckling Tiger Fund in the 1980s.