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Are Private Investments a Better Long Term Bet Than Traditional Savings?

Posted August 29, 2012 by irina to Finance 0 0
This post was written by a EasyFinance.com Community member. The views expressed below may not reflect the views of EasyFinance.com.

There are many reasons why traditional saving schemes and bonds are not treated with the reverence that they used to be. A lot of this is linked towards the all-time high level of mistrust that is now held over banking institutions.

Many individuals feel that private equity investments, either individually where possible or usually through a private equity fund, are the way to go in the modern day.

We looked at this trend and whether it will eventually be the standard way to save and make long term gains.

Guaranteed Interest

The one thing that keeps people interested in terms of savings is that there is usually the guaranteed or fixed rate of interest, at least for a set period of the savings scheme. Many of these also come with tax saving incentives as well as other reasons why it is an attractive option.

Bonds are losing a little of their lustre, as the volatile markets can have an impact on bond yields to the point where people are at risk of getting back no more than they put in ten years earlier, although on a positive not they will have at least not made a loss.

Perhaps the most intriguing aspect of the new found popularity of private equity investments is just that: if people could potentially make a loss, why are they doing it?

Investment Options

Private equity funds come in many shapes and sizes, and all with a different strategy and set of objectives, both for themselves and the people whose money they are dealing with. For every high risk investment opportunity that could yield a massive return but also the chance of losing everything, there are others that provide a low yield. At the same time, many of those that are a low yield investment still offer returns at a better equivalent rate to an interest rate from a bank, while steady returns are almost guaranteed.

Private equity firms who favour the safe approach will have a portfolio of businesses that they can demonstrate yields returns consistently, and also provide figures based on average returns over a number of years. It is this type of investment that is seeing people with an alternative option to using the banks whom they no longer trust to do the right thing, although it is unlikely they have ever been personally effected by the bank’s operations themselves.

There is also talk of government schemes in the United Kingdom to protect investments made through pension schemes, so people can invest without the risk of seeing a massive loss.

About irina: Irina works for DealMarket.com and has extensive experience with private equity investments / private equity funds, public company mergers and acquisitions, private company acquisitions, going-private transactions, private investment in public equity (PIPE) transactions.

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