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Investment Products: A Wide Variety of Investment Products Exist To Help You Achieve Your Financial Goals
Investment Products: A Wide Variety of Investment Products Exist To Help You Achieve Your Financial Goals
A wide variety of investment products exist to help you achieve your financial
goals.
Stock
Bonds
Mutual Funds and ETFs
Insurance Products such as Variable Annuities
Every investment product has its own general set of features including
level of risk and anticipated returns.
Risk and Return. Risk means how safe your money will be and return
is how fast your money will grow. Generally, as investment risks rise,
investors seek higher returns. Be careful, you can lose all the money
you invest, including your principal.
Risk and return aren’t the only considerations when deciding what types of
investment products to invest in. You may also want to consider:
When you invest in a private equity fund, you are investing in a fund
managed by a private equity firm—the adviser. Similar to a mutual
fund or hedge fund, a private equity fund is a pooled investment vehicle
where the adviser pools together the money invested in the fund by all the
investors and uses that money to make investments on behalf of the fund.
Unlike mutual funds or hedge funds, however, private equity firms often
focus on long-term investment opportunities in assets that take time to
sell with an investment time horizon typically of 10 or more years.
A typical investment strategy undertaken by private equity funds is to take
a controlling interest in an operating company or business—the portfolio
company—and engage actively in the management and direction of the
company or business in order to increase its value. Other private equity
funds may specialize in making minority investments in fast-growing
companies or startups.
Even if you are not invested in private equity funds directly, you may be
indirectly invested in a private equity fund if you participate in a pension
plan or own an insurance policy, for example. Pension plans and insurance
companies may invest some portion of their large portfolios in private
equity funds.
Illiquidity
Conflicts of interest
Private equity firms often have interests that are in conflict with the funds
they manage and, by extension, the limited partners invested in the funds.
Private equity firms may be managing multiple private equity funds as well
as a number of portfolio companies. The funds typically pay the private
equity firm for advisory services. In addition, the portfolio companies may
also pay the private equity firm for services such as managing and
monitoring the portfolio company. Affiliates of the private equity firm
may also play a role as service providers to the funds or the portfolio
companies. As fiduciaries, advisers must make full disclosure of all
conflicts of interest between themselves and the funds they manage in
order to get informed consent.