My financial advisor mentioned this as something to look into down the road.


Anyone have any experience with this? Is this a good idea for diversification, putting some money in things with a higher risk/reward so perhaps a smaller piece of a total portfolio

As I understand it, it opens the door to private equity and other options.


Also, thrrr seems to be some confusion on whether home equity counts or not to qualify

Anyway, any thoughts. Relying solely on stocks and bonds for retirement seems fine but a little extra diverse seems good

The SEC defines what makes an accredited investor but firms may add to it if they want to, and some individual products have high net worth/free cash minimums that are not affiliated with an accredited Investor. Home equity is not a factor, in fact some firms prohibit a client investing home equity loan proceeds in certain products. As to whether or not the investment you want to put money into or not, that depends entirely in what it is. That's like asking "Is it time to invest in a hedge fund" without knowing what they are hedging.

There is some pretty good discussion on this thread a while back:

https://texags.com/forums/57/topics/3446843/replies/67063169

You can make a good bit of money but make sure you know your exit strategy when these investments turn bad. There's typically no easily accessible market to offload your ownership.

If you're selling because the investment is going bad, there's no way the company is going to purchase them back.

The investment managers will do everything in their power to keep you from understanding the risk weighted returns of their business - it's always blue skies as far as they are concerned.

A lot of them have multi year lock up periods so if things go bad there really isn't much you can do but kiss the money goodbye.

permabull said:

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A lot of them have multi year lock up periods so if things go bad there really isn't much you can do but kiss the money goodbye.

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It's a more sophisticated form of gambling.

It's just a business on the other end instead of a casino. And the business and gambler can both win.

But with respect to the possible outcomes for the investor… it's gambling.

Diversify and then decide your risk/reward tolerance. There is a reason rich people use more "exotic" investments instead of just 401K.

Put money in your 401K and matching. Then do Roth.
Once you maxed this out or feel you have enough, then think about buying a rental property (think Duplex) if you have the time/enjoy this stuff.
If you have extra money, think of doing a business or non IRA things. Syndications, accredited stuff, etc. When you have extra $$ and high net worth, these will find you. If you invest, its all about the operators. Pick the operators wisely.

It just means that you have enough money to lose in a lousy investment and said investment/syndicate can protect itself once the investment goes under and wall you off in court

Some of the best investment opportunities are actually found when you become a Qualified Purchaser. 5 million liquid net worth. It's at that level that you can invest in many very cool funds.

For example: the opportunity exists now to invest in a minority interest in professional sports teams.

I would hardly call that a junk investment.

Venture capital is very risky but there's quite a few funds that have produced 20%+ for decades.

The forms your financial advisor will have you fill out to submit to the accredited investor overlords will tell you everything you need to know!

https://www.yieldstreet.com/resources/article/qualified-purchaser-vs-accredited-investor-what-you-need-to-know/

There are more than a few mutual fund and ETF's using strategies like options, futures, currency plays, that the normal investor doesn't understand and either the fund or the brokerage will limit your ability to buy in without meeting their criteria of "accredited" which is usually a minimum level of net worth.

Aggie09Derek said:

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https://www.yieldstreet.com/resources/article/qualified-purchaser-vs-accredited-investor-what-you-need-to-know/

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Distinctions between the two are interesting. Qualified Purchaser based on investment balance ($5M min). Accredited Investor based on your cash flow ($200-300k per year but only $1M in investments). So this latter person is either spending everything they make or they are somewhat freshly minted at that salary level and haven't had time to build up wealth.

Just using that as an example. The simple mathematical reality is that private equity if you take the good and the bad and average them has historically performed about 50% better than public markets. Net of fees.

That's not to say you should have all or even a majority of your money in this stuff and you have to make sure you are doing proper diligence to make sure you are investing with reputable managers.

But most important is that private equity, private credit and private real estate tend to be uncorrelated to public markets.

Yeah I'm sure people are willing to sell off a few % of their stake at a valuation 2x what going rate would be for the team.

On the other hand you have guys like Magic Johnson being an owner of Dodgers, guessing his terms are crazy favorable just to have him as an "owner".

Proposition Joe said:

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nactownag said:

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Some of the best investment opportunities are actually found when you become a Qualified Purchaser. 5 million liquid net worth. It's at that level that you can invest in many very cool funds.

For example: the opportunity exists now to invest in a minority interest in professional sports teams.

I would hardly call that a junk investment.

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Maybe I'm just incredibly cynical, but I think if opportunities exist to invest in minority interest in professional sports teams, you are getting marketed something that sounds really cool but has you so far down on the priority totem pole that you are essentially just offering up free capital to the major investors and getting a return that is a fraction of what the risk should produce... but it likely gets you invited to a fun little "investors" dinner with Nolan Ryan or something.

Maybe the opportunities I researched in the past just happened to be bad ones, but so many of these things are structured in a way that you are the last person to see actual profits. And with the creative accounting many of these sports franchises use? No thanks.

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I've looked at a couple of these, and not being much of a sports fan, it's easy for me to look past the hype. If you look at the returns of premier league (MLB, NFL, NHL) sports teams that were purchased 20+ years ago and sold in the last 5 years, they're astronomical. Part of the pitch is predicated on the exit. The interim returns are based on things like TV rights, marketing deals, facility development agreements with municipal counterparties, and increases in ticket prices, concessions, and merchandise.

In my opinion, we're not going to see the uplift in value in professional sports franchises like we did in the last 20 years. If we do see a substantial uplift, I think it will be because of the fractional ownership structure these funds are creating, but I don't know what/who the successor purchaser would be. I believe TV contracts, branding/marketing deals, and game day item prices are near maxed out. I think the syndicators of these investments will do well because they will make their money in fees off the investors.

As Uncle Warren says; things run in cycles of innovators, imitators, and incompetents. I think we're entering the incompetents stage of professional sports ownership.

Proposition Joe said:

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nactownag said:

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Some of the best investment opportunities are actually found when you become a Qualified Purchaser. 5 million liquid net worth. It's at that level that you can invest in many very cool funds.

For example: the opportunity exists now to invest in a minority interest in professional sports teams.

I would hardly call that a junk investment.

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Maybe I'm just incredibly cynical, but I think if opportunities exist to invest in minority interest in professional sports teams, you are getting marketed something that sounds really cool but has you so far down on the priority totem pole that you are essentially just offering up free capital to the major investors and getting a return that is a fraction of what the risk should produce... but it likely gets you invited to a fun little "investors" dinner with Nolan Ryan or something.

Maybe the opportunities I researched in the past just happened to be bad ones, but so many of these things are structured in a way that you are the last person to see actual profits. And with the creative accounting many of these sports franchises use? No thanks.

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Yeah, I think it might appeal to those who want to feel they are a teeny tiny fractional Jerry Jones. And I mean teeny tiny. Invited to a couple of dinners per year, hang out with a couple of players, sort of thing.

Might be better off fully owning a franchise in a newly formed quidditch or pickleball league!