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Learning, Sharing, and Teaching => Investor Alley => Topic started by: FIKristen on July 12, 2018, 03:26:36 PM

Title: Any accredited investors in the house?
Post by: FIKristen on July 12, 2018, 03:26:36 PM
Any accredited investors out there with investments that are only open to accredited investors?   How are they performing?   

What advice do you have to MMM readers who are newly minted accredited investors and desire to learn more about how to evaluate the new range of investment opportunities before us?
Title: Re: Any accredited investors in the house?
Post by: Mighty-Dollar on July 13, 2018, 01:50:12 AM
Any accredited investors out there with investments that are only open to accredited investors?   How are they performing?   

What advice do you have to MMM readers who are newly minted accredited investors and desire to learn more about how to evaluate the new range of investment opportunities before us?
I don't touch private equity with a 10 foot pole. Loosely regulated. Vulnerable to fraud or just plain a bad deal / long shot.
Title: Re: Any accredited investors in the house?
Post by: sokoloff on July 13, 2018, 06:09:54 AM
Any accredited investors out there with investments that are only open to accredited investors?   How are they performing?   

What advice do you have to MMM readers who are newly minted accredited investors and desire to learn more about how to evaluate the new range of investment opportunities before us?
Most of them are worse on a risk-adjusted basis than VTSAX. Most of them have substantial downside risk, including fraud and position concentration risks.

Don't fall for the storyline that "once you've hit this milestone, you suddenly have access to the Illuminati perpetual money machine investments". It's bogus.

I've made a few angel investments, bought some pre-IPO shares in a secondary market, and am considering investing in a venture fund. None of those have been home runs (yet), some angel investments have gone to zero, some are still active and look maybe promising but not life-changing. With regard to venture or hedge funds, beware of adverse selection. The best funds don't want to touch your $500K investment; it's just not worth their time. So, you end up with the crappiest/shadiest/lowest edge funds who are willing to talk to you about investing $100-250K. Don't do it.

Under $5M investable net worth, stick to exactly what got you here. Only over that, or only if you have a particular edge (security researcher angel investing in a tech security company), should you consider changing. My humble opinion, worth about twice what you paid for it. :)
Title: Re: Any accredited investors in the house?
Post by: FIKristen on July 13, 2018, 04:24:17 PM
Thanks for the responses.   In reviewing info at bogleheads & elsewhere there seems to be a consensus that the best opportunities are reserved for those with much larger amounts of $ than your standard "single digit" millionaire has; as I'm nowhere close to double digit millionaire status I'll stick with investments within my own control for now: real estate, side businesses, etc. if I want to do something more active with the pot.

Still curious to hear details on failures though - everyone has plenty of negative stuff to stay about investments open to accredited investors, but few actually offer details on their experiences.
Title: Re: Any accredited investors in the house?
Post by: brooklynmoney on July 14, 2018, 09:29:30 AM
Most of us are smart enough to avoid these “opportunities” I.e. the 2 and 20 fee structure of many hedge funds.
Title: Re: Any accredited investors in the house?
Post by: MustacheAndaHalf on July 15, 2018, 03:58:50 AM
Hedge funds are an example of something accredited investors buy into.  But hedge fund reporting is voluntary, and most people don't like to embarrass themselves publicly.  So there's some bias in the reported performance of hedge funds.

Warren Buffet bet an index fund would beat a collection of hedge funds.  The S&P 500 index gained +125% in 10 years, while the hedge funds averaged +36%.  And that's without survivorship bias, since the hedge funds were fixed when the bet started, and tracked for 10 years.  But unfortunately the names of the losing hedge funds were not revealed.
https://money.cnn.com/2018/02/24/investing/warren-buffett-annual-letter-hedge-fund-bet/index.html
Title: Re: Any accredited investors in the house?
Post by: SeattleCPA on July 15, 2018, 07:32:10 AM
I always say stuff like what I'm about to say--sorry for being a broken record on this--but if you're thinking about alternative asset classes (hedge funds, private equity, direct real estate, etc) you would benefit greatly by reading David Swensen's book, "Pioneering Portfolio Management (https://www.amazon.com/Pioneering-Portfolio-Management-Unconventional-Institutional/dp/1416544690)." That book describes how Swensen thinks Yale succeeds investing in the stuff accredited investors want to invest in.

I think some of what Swensen describes can be applicable to individual investors are I discuss in this blog post: Successful Active Investor Tips from David Swensen. (https://evergreensmallbusiness.com/successful-active-investor/)

E.g., if you own a small business (that's "private equity" or "venture capital" like)... or if you're investing in direct real estate.

But except in those sorts of special cases, oh my gosh, alternative asset classes for individual investors seems pretty impractical.

Based on Swensen's descriptions of how Yale succeeds, and except for the special cases like small business ownership already mentioned, it sure looks to me as if this is something you need at least hundreds of millions of dollars (maybe more?) to attempt.
Title: Re: Any accredited investors in the house?
Post by: hodedofome on July 15, 2018, 02:30:45 PM
OP, what’s your background? What do you know a lot about?
Title: Re: Any accredited investors in the house?
Post by: HAPPYINAZ on July 27, 2018, 12:27:02 AM
What type of investments are you interested in OP?