Investing in a well-diversified portfolio is a cornerstone of sound financial planning. A balanced portfolio can help you weather market ups and downs and achieve your long-term investment goals. Modern portfolio theory highlights the importance of including a mix of assets with low correlation, such as stocks and bonds, to improve overall portfolio returns.
Private equity can play an important role in portfolio diversification as well. Startups and early-stage companies are often considered non-correlated assets, meaning their performance is not tied to the overall stock market. When properly diversified, a portfolio that includes private equity has the potential to offer better returns than a portfolio made up of only publically traded assets.
Contrary to popular belief, you do not have to be an accredited investor to participate in private equity. By investing in private equity, you can gain access to investment opportunities that may not be available to the general public. However, investing in private equity, particularly at the pre-seed and seed stages, can be challenging. Due diligence is key when evaluating private equity opportunities. The team behind the startup, their ability to execute product development and go-to-market strategies, as well as their financial projections, are just a few of the important considerations for angel investors.
If you are interested in learning more about the role of private equity in portfolio diversification and the basics of angel investing, sign up for Evolution Accelerator's free Introduction to Angel Investing class on February 15th. The class is designed for anyone looking to expand their investment knowledge and is open to everyone, regardless of their experience level.
Disclaimer: This is not investment advice. Please conduct your own research and consult with a financial advisor before making any investment decisions.