Private Equity For Retail Investors
Meb Faber Podcast - A Wealth of Information
Yesterday Meb Faber release a podcast interview that was very interesting. Episode #254: Ken Nguyen, Republic “In The Past Ten Years, The Private Market Has Become Larger Because Companies Are Taking Longer To Go Public” https://podcasts.google.com/feed/aHR0cHM6Ly9tZWJmYWJlci5jb20vZmVlZC8/episode/aHR0cHM6Ly9tZWJmYWJlci5jb20vP3A9MTMxMzU?hl=en&ved=2ahUKEwiEvKToibLsAhWCsJ4KHaF8CIsQieUEegQIHRAF&ep=6
I highly encourage everyone interesting it start up investing to listen to the interview.
Photo by Burak K from Pexels
Problem with Current Regulations
Private Equity has largely been out of reach for retail investors since the SEC has ridiculous rules requiring people to be accredited. "To be an accredited investor, a person must have an annual income exceeding $200,000 ($300,000 for joint income) for the last two years with the expectation of earning the same or a higher income in the current year." -source https://www.investopedia.com/terms/a/accreditedinvestor.asp. Or "A person is also considered an accredited investor if they have a net worth exceeding $1 million, either individually or jointly with his spouse." -source https://www.investopedia.com/terms/a/accreditedinvestor.asp.
The regulators thought these rules would protect investors who are less sophisticated but as time has shown someone who makes a lot or has a large net worth is not automatically a more informed investor than someone with less means. Besides there are no regulations to stop people from doing other stupid things with their money such as lotteries and casinos. At least with investing in start up people would have a higher probability for financial profits than the chance of lottery winnings.
Congress and the SEC have begun to loosen the rules to allow every day investors to participate in the largest wealth generating part of the entire equity market. Think about buying into Uber at a million dollar valuation or even a billion instead of waiting to pay an outrageous $40 billion at IPO.
The process to allow retail to invest in private equity began in 2012 with President Obama passing the JOBS ACT. "For the first time, ordinary Americans will be able to go online and invest in entrepreneurs that they believe in." - Barack Obama
The SEC is also working on changing the definition of accredited investor to be more knowledge based and less financial based.
Republic - Pioneering Private Investing
I am planning on spending a lot of time research this platform as I have always wanted to invest in start ups. Waiting to invest in innovative or other attractive business until IPO is no longer working for retail investors. Companies are waiting too long to go public and by the time they do there is very little meat left on the bone.
The platform is very interesting as they are highly selective ("Less than 3% of startups that apply pass through our due diligence and investment committee."), free for investors ("Republic is investor-friendly by design with no hidden fees and top-rated customer service."), and accessible ("Industry-lowest minimums starting as low as $10 also help you build a more diversified portfolio.").
Investing has its risks whether in the public markets or private studies show that only about 25% of companies drive all of the investor returns, 50% of companies basically break even and the bottom 25% go bankrupt or close to it.
With investment minimums so low on Republic you can easily build a portfolio of start-ups of 10, 20 or even 100. You just need to go in knowing that some will fail, some will do nothing and the few that hit it out of the park are expected to drive your whole total return.
If you are interested in learning about private equity investing check out https://republic.co/ today.
Disclosure: I wrote this article myself, and it expresses my own opinions. I have no business relationship with any company whose stock is mentioned in this article. The information provided should NOT be considered advice. The topics discussed are risky and have the potential to lose a substantial amount. I am not an investment professional and therefore do not offer individual financial advice. Please do your own research before investing.
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