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Too many people are throwing around the "people are just seeking a place to park their cash because the economy sucks" misguided idea. Startups offer investors
by heelhook 14y ago
Too many people are throwing around the "people are just seeking a place to park their cash because the economy sucks" misguided idea.
Startups offer investors exactly the opposite of what a capital preservation strategy seeks: high risk with low possibility of considerable returns.
Even if the world economy were in recession (its not [1]) most asset managers would recommend dozens of other asset classes before recommending investing in a startup for capital preservation, specially when inflation is low as is the case in most of the world at the moment [2].
[1] http://en.wikipedia.org/wiki/Global_recession http://en.wikipedia.org/wiki/Global_recession http://www.economy.com/dismal/map/default.asp http://www.economy.com/dismal/map/default.asp
[2] http://www.indexmundi.com/world/inflation_rate_(consumer_prices).html http://www.indexmundi.com/world/inflation_rate_(consumer_pri...
- Androsynth 14y agoInvestment in a single startup is very risky, but if you were supplying the capital for a venture capital firm, I would imagine the investment would be much more consistent. I haven't done any real research, but I strongly suspect that a lot of VC firms are making good returns across their portfolios.
- heelhook 14y agoYes, portfolio diversification is investing 101 (kinda curious how most of us here, when working on a new startup, will invest close to 100% of our awake time for months with no diversification) Your post is somewhat related to what I said. The point I was making was that saying that startups are getting funded because there are no better assets for capital preservation are misguided. You are talking about "making good returns across their portfolios", that's not the goal of capital preservation, that's the goal of capital appreciation.