Most white collar employees explore ways to invest their hard earned money which is mostly lying around in bank accounts. For the most of the population, a fixed deposit account is a way to go but there are other ways to reap as much as 50% return which is significantly higher than a fixed deposit account that can only yield up to 9%.
There are other drawbacks of Investing in a Fixed Deposit Account:
- Number one is that your money is permanently locked for a specific amount of time depending on the duration of your account’s term.
- Number two problem is that the yield that you receive will be set off due to the effect of inflation.
The solution to that problem is equity investing. Private equity funding is a process that takes money from big and small investors and invests that money in startups and established companies.
The term Private equity is generally used to describe all types of funds that pool money through the investors in order to gather a large sum of cash that can be used to acquire stakes in the companies at different stages of their maturity.
There are several types of Private Equity Funds such as
- Venture capitalist who only invest in startups to buy stakes that they can sell after the IPO
- Angel investors are individual investors who invest in startups and are usually the major investor in the company and have controlling stakes
- Growth equity funds fuel the expansion projects of well-established companies who seek large amounts of money for a particular project that capital intensive in nature, usually required for growth of the company.
- REITs are short for Real Estate Investment Trusts and as the name suggests such funds accumulate money from investors generally with deep pockets and invest in big residential and commercial projects.
- Leveraged buyout funds tend to invest in mature firms with rather stable cash flow generally in partnership with other private equity firms. They typically buy controlling stakes in companies and employ several techniques to create value.
Most of the investment takes place through these funds but the minimum amount that can be invested is usually large which is not suited for small investors. If that is the case then a mutual fund is a very attractive option that yields good returns with systematic investment planning option.