You would be crazy not to invest in private equity
by Arina Smith Business Development 15 November 2018
So, you do not have a clue where to invest your cash. Even though you are familiar with the wealth of investing options available, you simply cannot make a choice. Well, if you have some money to invest, direct your attention toward private equity. Private equity is available to private companies, as well as investors. Attention needs to be paid to the fact that private equity is not the same thing as venture capital. What is the difference anyway? Both of them simply buying low and selling high, yet there are significant differences in the way that things are done. We are not going to get into the subject right now.
All you need to know is that private equity is the kind of cash. If you are not willing to come up with the funding, then you might want to consider investing in stocks. Just so you know, it is worth taking into account private equity as part of your investment portfolio. There are very good reasons for investing in private equity funds or making investments directly into the operating company. Businesses are allocating more and more money to private equity and so should you? Maybe you are not able to see the opportunity, but we can.
What exactly is private equity?
The only thing that you know about private equity is that it is a type of investment in the economy. It is time that we filled in the blanks. Private equity is basically a word that is used in order to describe investments, which are made in non-public companies by means of transactions that are negotiated in private. Due to the fact that the capital is not publicly traded or listed, private equity is set up through private firms or funds. Speaking of funds, they have been created with the purpose of allowing investors to acquire high-performing companies and enable them to become profitable.
As a rule, investors and well-to-do individuals make a big hit with private equity. Nevertheless, investments of this kind are gaining more and more popularity among firms held under private ownership. When it comes to equities, there are many choices, including but not limited to government bonds, savings accounts, investment trusts, equities, real estate, precious metals and, last but not least, works of art. These alternative investments for money should not be ignored. As far as the money is concerned, it goes into companies that are thought to have considerable growth opportunities in industries like tech, telecommunications, and biotechnology.
Private equity has strong credentials:
If you are taking into consideration the possibility of investing in this particular asset class through XIO Group private fund, then you should get a good understanding of the benefits that it brings about.
1. Returns on private equity investments are the best:
The return on the investment, which is commonly referred to as ROI, is utilized by businesses in order to determine the profitability of an expenditure. The private equity sector has grown to trillions and it will continue to do so. Returns on private equity investments – in other words, the profitability ratio – is pretty high. Many think that the ROI is too high. What is certain is that the returns of private equity do not bear comparison to the performance of private equities. There is great potential for high returns and the risks are relatively low. It is not, therefore, surprising that private equity is very alluring. The investment benefits the company, not to mention that there are incredible rewards. At present moment, private equity beats public equity in terms of profitability.
2. It is good to have a diversified investment portfolio:
There is little talk about investment portfolio diversification. What you need to know is that making solid investments helps you avoid excessive risk. Most importantly, it will help you make significant gains. It is true that growing companies takes time, but it is all worth it. The cash is not trapped and all the money that you apprehend is capital gain, which is long-term. Institutions, as well as individuals, invest in private equity and the reason why they do it is that they are looking forward to increasing the performance of their investment portfolio.
3. Private equity benefits from tax advantages:
As mentioned earlier, the returns from private equity are considered capital gains. This practically means that you cannot complain about the tax structure. The rules are the same for any businessperson. It is important to pay attention to the new tax rules. They will not apply to interests that are held by companies, but you can never know what will happen. For the time being, anyway, there is no reason to worry about taxation. The capital gains tax will most likely be lowered, which is a good thing for business.
Average investors can play in the big leagues too:
There is an opportunity to invest in private equity and you should take advantage of it. So what if you are an average investor? You do not need to possess loads of cash. With a minimum amount of cash, you can do a lot. If you are interested in investing in one of the funds, then you should do it. An easy and efficient way to get started is to invest in a fund of funds. This structure holds shares in numerous private partnerships that deal with investing in private equities. There is no better way to increase your cost-effectiveness and reduce the minimum investment. Directly-held possessions are problematic, so you are better off constructing equity or fixed income portfolios. What a fund of funds does is represent a great many companies through different phases of investing.
If you wish to make an individual private equity investment, then go ahead. Nobody is stopping you. If you really want to be part of a private equity deal, you are going to have to search long and hard until you find your match. When you do, buy shares in the company that manages the fund. Investing in a manager is an option well worth considering. You do want to generate massive returns, do you not?