Venture capital is exciting, for one thing. People like it, and shows like “Shark Tank” have proven it on television.
But the real reason you want venture capital in your portfolio is that it’s consistently, for the last 35 years, been the highest returning asset class in the United States. It ranks in the 20-27% range on returns on a long-term investment, while the S&P does around 9-10% max. So it doubles the returns of most other investments you can put money into.
But it has always been a fortress. In the United States, wealth has really been built by owning private companies prior to them going public and then you get the multiples paid for public companies over time. So your wealth continues to grow and compound over time.
Warren Buffett in a way did this years ago when he bought the original Berkshire Hathaway Company that went into bankruptcy. It was a private company, and he later took it public and made it into the company it is today.
Microsoft was also built as a private company until they took it public. And these are really the kinds of companies we are taking on and allowing investors to invest in now. They will eventually go public and investors can at that point do whatever they want with the shares they get from their original investment. They can hold it forever if they want to. Like in Microsoft, which you might want to hold for a longer period of time. But that’s up to the investor.