Revealed: The Secret Wealth Investment That Yields Up To 15.5%
It’s an idea that the richest and most powerful people in the business world almost never say out loud.
But takeover king Wilbur Ross knows it. So does Herb Allen, the most exclusive banker in the world. And you can bet your boots that billionaire Warren Buffett knows what I’m about to tell you. In fact, he’s often said these are the types of deals he wants to pursue…
#-ad_banner-#Here’s Wall Street’s dirty little secret: The best investments in the world — those with the biggest returns and some of the highest yields — are not listed on any stock market.
They’re privately held…
According to an investing trade group report, as of June 2013, the private market outperformed the S&P 500 (including dividends) by 1.2 percentage points and 6.8 percentage points for five- and 10-year periods, respectively. From June 2003 to June 2013, the private market has averaged 15% annualized returns.
And it’s not limited to just recent performance. A study by professors at Duke and Ohio State covering a period from 1984 through 2010 found that private market investors earned 18% more than the S&P 500.
It’s proof that when it comes to investing, the rich really are different — they invest in better companies.
But exactly how do they do this?
Well, rather than buying shares on the stock exchange, savvy big hitters write a very large check to a very special kind of firm. To be eligible to invest like this, federal law stipulates that an investor needs to have at least $200,000 a year in annual income ($300,000 for a couple) and more than $1 million in net worth, excluding a primary residence.
That is a very high bar. Those rules block 94% of investors.
The official name for these highly exclusive firms is “private equity.”
A private-equity firm has more than a pile of investor cash to offer. It also provides executive mentoring and business advice — often from some of the biggest names in corporate America.
I like private equity because a lot of private-equity firms do the exact same thing I try to do with my newsletter, Game-Changing Stocks…
They try to find “The Next Big Thing,” and they seek to invest in it before anyone else realizes that they’ve found the golden ticket. (For example, Amazon founder Jeff Bezos invested $250,000 in Google in 1998… years before it even thought about going public.)
Here’s the good news. Private equity doesn’t have to be our competitor. It can be our partner. In fact, you and I can put private equity and its consultants to work for us the same way the billionaires do.
You see, private equity has historically been a “millionaires only” club, and it’s no wonder this special club has only been reserved for America’s elite…
For example, between 1973 and June 2013, Yale’s endowment fund generated average annual returns of roughly 30% in private equity. That includes a monster return of 168.5% in the year 2000, when Yale made $2.1 billion on its private equity investments.
Compare that 30% figure to the average gain of just 10.1% per year for the S&P over the same time period, and you start to see the type of impact private equity could have on your portfolio.
Given the returns they’ve generated, it should come as no surprise that private equity now ranks as Yale’s single largest holding. In fact, Yale invests twice as much money in private equity as it does in regular common stocks.
And Yale’s performance isn’t unique — as you’ll see in a moment.
The bottom line is that private equity firms have made countless fortunes over the years.
However, you couldn’t invest directly in private equity unless you were either an elite institution like Yale, or you ranked among the richest 6% of all Americans.
Fortunately for us, that slowly began to change starting back in 2007 when one of the largest players in this notoriously secretive industry made a surprising decision. It decided to list its shares on the New York Stock Exchange.
Thanks to these somewhat recent developments, you can now invest directly in a handful of the world’s biggest and most lucrative private equity firms. And with each and every deal they make, you can reap the same rewards that the ultra-wealthy have already been enjoying for decades.
Not to mention, you could enjoy the sky-high dividend yields many of these private equity firms pay out each year…
Just look at the yields of these four private equity firms available to buy on the public market:
Compared to the S&P 500’s measly yield of 1.9% over the same period, private equity certainly looks tempting.
You won’t become a multi-millionaire overnight by investing in private equity, but you’ll have a chance to bank a tidy profit from some of America’s fastest-growing private companies. And most importantly, you’ll tap directly into the private market — a market that’s cheaper and more lucrative than regular, ho-hum common stocks.
Few investors know about the power of private equity. That’s because, until only recently, they’ve been for “millionaires only” — regular investors like you and I were not invited to the party.
That’s quickly changing. I’ve been a big fan of private equity for years. And finally, this growing, dynamic area of the market is gaining the attention of regular investors. More and more of these “millionaires only” companies are going public each year. That’s why I predict 2015 will mark the year when more investors will be able to access these types of companies than ever before, allowing the little guy a chance to play with the big boys.
In my recent annual predictions report, “The Hottest Investment Opportunities for 2015,” I’ve outlined the best way to start making money in this “millionaires only” private market. I’ve identified a handful of my favorite private equity companies that invest in fast-growing businesses and reward shareholders with yields of 6.2%… 8.7%… even 10.4%. These are the same kinds of companies that have delivered gains of 41%, 46% and 76% to my readers in less than a year. To learn how you can invest alongside the world’s wealthiest with as little as a few hundred dollars, go here.