Benefits of Venture Investing Part 3: You Could Further Diversify Your Portfolio
February 10, 2021 | Jeannie Masters
When you imagine the venture capital industry, you might immediately think “high risk,” “exclusive,” and “elite.” While it’s true that this asset class is high-risk/high-reward, serious firms conduct far more diligence than TV would lead you to believe, and venture is an asset any individual accredited investor can own.
There are a number of financial and inspiring reasons to consider adding VC to your investment mix. At AVG, we have compiled a list of five compelling reasons to consider venture investing. Today we will discuss reason number three.
Reason #3: You Could Further Diversify Your Portfolio
You’ve likely given plenty of thought to diversifying your portfolio of publicly traded assets such as stocks and bonds. But have you considered the next level of diversification — diversification into private market asset classes?
Broader diversification can be gained by adding a long-horizon private investment like venture capital to your portfolio, alongside your short-term public stock portfolio that fluctuates in value by the day. VC returns have historically been strong and only loosely correlated with stock returns.
Alumni Ventures Group has talked to thousands of investors, and diversification often comes up as a reason for investing in venture. “When I speak to
investors and advisers about their reasons for wanting to invest in venture capital, either for themselves or their clients, the number-one reason is diversification — without question;” said Laura Rippy, Managing Partner at Green D Ventures. “They have a regular portfolio, diversified by large cap, small cap, stocks, and bonds. But they realize they are missing venture capital.
Cambridge Associates, a global investing firm managing and advising on large institutional portfolios, recommends that institutional investors put up to 15% of their portfolios in early-stage private companies with high-growth potential. In fact, Yale has targeted putting over 23% of its endowment into venture capital for 2021.
You might wonder what you have in common with an institution or endowment, but their investment goals can be similar to an individual’s. Each can be expected to seek positive returns and risk minimization through diversification.
The decision is this: What’s the right mix for you based on your circumstances and goals?
VC TIP #3
A venture portfolio can be a strategic addition to balance your overall portfolio. The appropriate investment allocation for you depends on your own circumstances. Consult your financial, tax, and other professional advisers to determine the right mix for your portfolio.
Financial and Inspiring Reasons to Consider Adding VC to Your Investment Mix
Check out a recent guide, titled Five Compelling Reasons to Start Venture Investing, to discover all five in-depth benefits of adding Venture to your portfolio.
DISRUPTING THE VENTURE INDUSTRY
Alumni Ventures Group (AVG) is democratizing the venture asset class by offering a path for accredited individuals to own an actively managed, diversified venture portfolio (about 20-200 investments per fund), co-investing alongside experienced VC firms.
Not sure if you’re accredited? Here’s how to easily find out.
For Important Disclosure Information, please refer http://avg-funds.com/Disclosures.