by Peggy Van De Plassche
Today we will address a basic but hyper important question when you start #investing in private markets — How much should you invest in privatemarkets?
Depending on your country, retail and qualified investors can invest more or less of their assets in private investments every year.
My personal advice is to invest what you can lose, what you can forget about, what you won’t need. For some of us it will be $500, or $5,000, and for others it will be much more!
So as you start investing in private markets assume that you have the minimum risk tolerance.
Private investments especially in earlystage companies can be super rewarding and also very risky, on one hand you can literally loose 100% of your capital overnight and on the other hand it usually takes forever for a company to have what is called a liquidity event. A liquidity event will create the opportunity for to get your #money back with hopefully handsome #returns.
So again investing in private markets is very high risk and you will have huge delay in getting your money back. This is not for the faint of heart! But as always, huge risks, potentially huge rewards!!
Once you have established your budget, divide that amount by 5 to 10. You will invest only a portion of your overall budget by company, from 10 to 20% by investment.
This is for a couple of reasons. The first is diversification. You are going to win some and to lose some, so you don’t want to put all your eggs in the same basket.
Second this is a learning opportunity. Today you don’t know what you don’t know when it comes to private markets. So each investment you make will give you the opportunity to learn and become much more savvy when it comes to private investing. You want to maximize this learning opportunity by allocating smaller checks to several companies. And trust me you will make mistakes, we all do!!
The next step for you now will be to master dealsourcing and duedilligence, as they are key steps to be successful. You will find more insights on subsequent newsletters.
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