I was at an investor conference, the Progressive Investor Network, where Morgan Stanley’s Wealth Management group was the sponsor. Their representative made a comment in his opening remarks…. “We have clients that come to me asking for a greater yield than the 4% they get in the bond market or the unpredictable, lack luster performance of the stock market these days. They see Angel Investing as a way to potentially create a greater yield for a portion of their portfolio.”
If that is the case, then why don’t more high net worth people jump in and do angel investing?
It could be answered by the philosophy of the guy that we met later that day at the Buckhead Club. This gentlemen was the founder and operating partner of a financial wealth management firm operating for decades in Atlanta managing trusts and large estates. He called himself a “technician”. The attraction of a greater “yield” was of little interest to him. The idea of making 10 or 20 X your money wasn’t as appealing as having a steady predictable return. He did concede that if he was to start a company because he had a great idea, he would put his own money in then go to his buddy Fred, and Fred might go to his buddy John, and they all invest to get the thing done and make money. But Hey….isn’t that angel investing? And wouldn’t Fred and John invest because they thought they would get a GREATER YIELD?
So the answer to the Million Dollar Question: Can Angel Investing Create a Greater Yield? Yes, absolutely, and great wealth has come from it. The wealthiest invest privately in companies to get a greater yield. Sometimes it comes from a friend of a friend. Sometimes it comes from meeting a company at an investor event. Their is Risk involved in all of it. Fortunes have been lost in real estate that was bought with high interest at the wrong time….didn’t Trump almost lose it all from a real estate and credit slump about 20 years ago? The stock market has robbed people of their retirement and their livelihood too. It all comes down to this: mitigate risk and diversify.
I’m working on book 6 of the Learn to Be an Angel Investor Series….and it will explore this topic in much more greater detail with bunches of stats and historic perspective.