The Reason Why Investments Are Going Down
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Many investors looking to build venture funds or start private equity funds are now finding it difficult to find good deals because of the increase in IPOs that means fewer companies are going public.
This has created a problem where the available venture money is not enough to fund all the deals that are available for funding.
It's likely that some venture funds will be forced to lower their standards because of this and invest in companies that may not have the best track record, nor provide the highest returns.
Another reason why investments are going down is due to the recent increase in the cash out from companies that have been listed on the NASDAQ stock exchange. This increase of cash out has also meant that companies that have already listed have less cash to pay off their debt.
The companies are rushing to raise capital via the IPO market to pay down their debt and close the book on their IPO. This has caused the IPO market to increase at an accelerated rate which means that less deals are available for funding.
The takeaway from all of this is that it's a good time to invest in private equity investments. These funds are generally secured and are low risk.
If you're looking to invest in private equity you will be able to find some amazing deals from this market and you won't be left with a pile of cash to pay off when you need it.
Investments Are Going Down
Let us get this straight, investors have been going down on their investments over the past few years, and they will continue to do so.
Investors are starting to realize that their investments are incredibly overvalued, and they have had a tough time coming to terms with this.
Many investors, no matter how simple minded, will accept what is happening in their investment portfolio. They are starting to realize that overvaluation is much more than just a market in decline.
Investing into a stock or real estate should never be based on overvaluation. These are different beasts.
They each have their own reasons why they are out of balance, and these are not just accounting issues or long-term economic changes, but the short term influences of sentiment and people.
There are a number of reasons why assets will continually go down, and that these should be reviewed as we move forward.
Buyer's remorse is when an investor purchases an asset in its current state, and subsequently realizes that it is at its highest in its lifetime, and worse yet, it is not going to get better.
Buyer's remorse is prevalent in equities, and if we look at it long-term, the decline is only going to accelerate.
The numbers make this clear, with the S&P 500 experiencing a decline of -32.71% since July, and that is not yet accounting for the decline in value over the past few months.
When investors take the time to review their investments, they realize that they were mislead. Their equity holdings did not go up during the 1990's bubble, and their real estate holdings did not appreciate during the 2000's housing bubble.
Investors begin to question their investment decisions, and with the prices of stocks, real estate, and bonds at extremely high levels, the results of their curiosity is much less important than their long-term convictions.
Over the past few weeks, there have been many "pull the other way" articles.
In late January, there were a few articles, such as this one, stating that the market should look like the Dow Jones Industrial Average, which was valued at just above 13,000 when we started 2018.
In early February, there was this article stating that the investor's plight was similar to buying a home. When selling a house, the buyer is "buying the home they want at the price they can afford."
However, in many cases, the investor purchased their home as they wished, which is much higher in value than they would have liked.
The primary investor's mistake was they purchased the asset "at the price they can afford", which is pretty close to the price of that home. Investors rushed to sell their stocks, but they were not purchasing the asset they wanted, the asset they "could afford".
During this selloff, the buyers were the prudent ones, and the sellers were the ordinary people.
The next several weeks will be all about buying low. The investors who will be buying in these markets will be purchasing when they believe the selling will end.
Every investor should have a plan of action when entering a new investment.
It can be as complex as constructing a fully automated stock broker account, which runs on very sophisticated software. It can also be as simple as buying an index fund such as SPY.
Most people buy stocks or real estate "because they love it". All investors should have a plan for when that love turns to love.
The only reason many investors are taking profits is fear. This fear of losing money, because they think the market is in a bubble is a fear of buying at the wrong time.
Anytime that you are afraid, you buy lower. When you feel comfortable, you buy higher.
When you feel ready to sell, you sell at the highest point.
Our point is that fear is a healthy emotion, because it is your natural defense mechanism to help you when you are in trouble. When fear disappears, it is time to cash in the chips.