What is a private investment?

From a macroeconomic point of view, a private investment is the purchase of a capital asset that can produce an income, appreciate in value or both. A capital asset is a property that is not sold easily and it is generally purchased by an investor for profit making. For example, land, buildings, equipment, machinery, etc.

In the world of macroeconomics, investments and savings are not the same. For instance, if you purchase a capital asset, such as a machine or a house without a motive of generating an income, then you're saving but not investing.

What You Should Know About Private Investments?

- You Don't Necessarily Need To Be Rich To Participate

Generally, it is believed that you need to be a wealthy individual to become an 'accredited investor'. As an individual investor, you need to have a net worth of more than $1 million which excludes your primary residence. You can also become an accredited investor if your annual income exceeds £200,000 during the last two years.

You need to be an accredited investor only for a certain type of investments. Private investing is not limited to the accredited investors only. You can invest in local businesses, equity, etc.

- Not All Private Investments Are The Same

Private investments can include equity, debt bonds, government securities, etc. They can involve private funds that can be invested in various types of assets. These funds can offer professional management as well as diversification. For e.g., hedge funds are a type of private funds that are hedged against a spectrum of investments.

- Being Well Connected Is Not Necessary

You don't necessarily need to be well connected to participate in private investing. There are a number of ways in which issuers and investors can seek each other out.

Legal Aspect

You cannot undermine the legal aspect while investing. Whether you want to invest in venture capital, infrastructure, private equity, hedge funds or real estate, you need a team of experienced lawyers to make sure that everything is handled properly. Firms like Goodwin offer you the best advice when it comes to wealth management and private investing.

Final Thoughts

As a private investor, you need to keep an eye on the latest developments. As the marketplaces become more streamlined and accessible, the participation grows over a period of time. The increased liquidity and secondary markets can keep the risk minimum. It is also quite important to diversify your funds to protect them.