The Real Risks With Investing In Private Equity

The real risks associated with investing in private equity.

For beginners, it’s important to know that there are two ways to get into private equity.

The first is to invest in a PART of a company.

For example, you give $20k and take 10% ownership of the company. Things like you see on shark tank.

To me, this is the HIGHEST RISK way to get into private equity because your returns are completely dependent on the business owner and team in place.

Which means you have a lot less control over getting your money back.

I personally participate in this form of investing because I have a high-risk tolerance and have been investing for a while.

The second way to get into investing is to buy entire companies.

This is less risky than the above because you own 100% (unless you have a partner, which I do recommend for beginners) so you have control over the business, marketing, and decisions.

That is, of course, if you have some business sense.

Which brings me to my point… You only want to invest in companies that you understand.

I never invest in “proprietary” anything because that’s just a fancy word for complicated… and I believe in the law of simplicity.

I fundamentally understand how a convenience store works so I am prepared to own that. A doctor’s office though? Probably not.

This is important because many people fear that once they buy a company that it will suddenly go under and they’ll lose all their money.

This almost never happens.

Unless you are just sending people money without ever looking at their accounts and doing the due diligence… Which I’m hoping you’re smart enough not to do.

But seriously, in helping facilitate thousands of deals I have seen less than 3% go to $0.

So the “risk” isn’t really that you’ll lose all your money.

The TRUE RISK is more that your investment won’t hit your projections.

See, some people invest in growth opportunities. Meaning they invest thinking the company will grow another 20% per year (or something).

The problem with that is you can never predict the markets.

Predicting growth is extremely unreliable.

What you CAN reliably predict is for a company to stay at the same level and not grow at all, if it has months or years of being stable.

If you invest in a company because you like the numbers NOW then it could be a good deal.

But if you’re considering an investment because of what you *think* it might hit down the road, then you are making a risky investment.

Less than 10% of companies hit their projections accurately.

Under 50% of companies hit their projections within a 30% margin.

Which means that 40% of companies make a growth plan… Create projections… Work at it… And still end up at least 30% off of what they planned.

So my advice to you is this…

Only invest in companies for where they are today if they have a stable history of generating those results (at least a couple of months)
Only invest in companies you understand (keep it simple, don’t go for the sexy tech company)
Don’t buy a company and change everything on day one. This WILL make you go under. Instead, buy a company and try to keep as much of it the same as possible. It’s already working and profitable. You may want to change things to make them more “your taste” or “improve” things in the business. Don’t. Wait at least 3-6 months before changing anything, unless there is an emergency.
Always hire an “operator” or “manager” of the business so that you aren’t stuck doing payroll and ordering supplies.
This will cut into your profit if they don’t already have someone in place doing it, but it’s worth it. Make sure the numbers work AFTER you include the expenses of hiring someone. Hiring someone can range depending on what you buy. If it’s a coffee shop it could be $30-$40k per year. If it’s something more advanced like a high-end hair salon, you may pay them more.

Stick to those core rules and you will have:

Passive Investments that you don’t have to do anything for (after you set it up)

Predictable returns

Peace of mind

Now with all of that said…

You will have some loser investments. It’s the same thing as having a losing marketing campaign that you spent a lot of time and money on.

Don’t over-exaggerate and make it seem worse than it is.

A failed investment is okay.

You can recover from it if you follow a methodical investing plan so that you’re diversified and covered IN CASE something does happen.

How to invest methodically to make sure that you’ll be profitable even with a few failures?

Well… You come to our Investing 101 Event.

Where we help you create a personal investing strategy so that you know exactly HOW MUCH and WHERE you should invest your money based on YOUR goals and risk tolerance.

We do this so that you can be safe with investing.

You will have a predictable model of where to move your money and how much you should expect back.

You absolutely should NOT be investing without some sort of plan that factors in your income, cash on hand, goals, risk tolerance, age, and other factors.

So if you think to yourself… ah, I’ll just go make an investment first and then once it’s profitable I will come to this event… then you have it all wrong.

That’s not how investing works and that increases your risk exponentially.

So if you’re someone who knows they want passive income and true wealth, but you also worry about risk and being safe…. Then this event is vital for you.

For 4 days we are going to hold your hand by showing you how you can turn your $10k into a small business that pays you $3k per month forever.

Or in some of our bigger examples… Turning your $15k into a coffee shop that pays $10k per month forever.

AND we even plug you into these types of deals that don’t require a lot of capital to get started.

Yes, we pre-negotiated deals on your behalf.

Which means you can walk out with your own cash flowing asset that we held your hand through so that you feel safe and confident in your investment.

And even if you aren’t ready to make an investment at the event…

You still know where to put your money based on your goals and how to turn your cash into an asset that pays you passively every month.

Our next event is January 27th – 30th in Miami (virtual seats are open as well).

Come learn how to build passive wealth with us. Reserve your spot now.

You’ll never see making money the same way again. It will never be easier and more abundant than after you unlock the world of investing.

Book your call here to learn more.

Jeweliet

Jeweliet Tangen

Hi! I'm Jeweliet, an ex-consultant turned investor. I started my first business while working full time as a waitress at 16 years old and never looked back. Soon, I started "stacking up" cash from the profits of my business and I decided to learn investing so that my wealth could grow even faster. Within 3 years, I "retired" from my business (which I hated) and am able to live fully off of my investments.

Now I teach entrepreneurs like you how to do the same. Because the more freedom we have, the more we can give back. When I'm not working on an investing deal I'm working on my charity #WeRescueKids or taking a few months off on a beach... Because I can do that now 🙂

DISCLAIMER: Nothing found or understood in this video, or in any other herein, should be considered financial or legal advice. We aim to educate everyday people on how investing works and show them how to make smart decisions for themselves. By watching this video, or any other herein, you understand you are solely responsible for your own due diligence with investing.

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