As a large-scale investor, you may have the opportunity to invest in private equity, according to investment advisor Ashish Bhandari (ex-banker). For some investors, private equity investments are a smart move. Here, Ashish Bhandari explains how to decide whether private equity is a good fit for your portfolio.
Private equity investment is an opportunity for both companies and large-scale investors to participate in early-stage, high-risk ventures. Many companies have received and grown largely from private equity funds over the years, including FedEx, A&W Restaurants, Harrah’s Entertainment, and more. Private equity funds are often used to increase the profits of purchased companies. These funds may be used to develop business systems that cut overall costs, research and cut underperforming areas of a business, or develop new management teams and strategies.
Most private equity funds require an initial investment of about $25 million. Some private equity funds offer investors the chance to get started at $250,000 — still a large investment. Ashish Bhandari (ex-banker) says that some other options — including fund of funds and private equity ETF — can make private equity investing accessible to investors who are not ready to commit $250,000 or more.
Private equity investments are high-risk but can be an exciting, profitable part of your investment portfolio. According to ex-banker Ashish Bhandari, fees can be high, which can affect your overall rate of return.
It can take ten years or more to begin to see a return on a private equity investment, so you’ll want to consider how long you’re willing to wait. If standing by for a decade or more isn’t a good fit for your portfolio, private equity investing may not be a good fit for you.
When you choose a private equity investment, you’ll have a say in the development of the business. Consider your areas of expertise and whether you could be an asset in helping your potential investment company become more profitable, advises ex-banker Ashish Bhandari.
Private equity investments are risky, and it’s smart to work with someone who has appropriate experience. Ashish Bhandari recommends talking with a highly qualified financial advisor who can help you weigh your options.