Every private fund risk disclosure says it: you could lose all of your investment. Leverage, a market downturn, a natural disaster, fraud or simple bad decisions can wipe out equity.
A simple stress test
- Write down the amount you are considering.
- Imagine it is gone and no distributions ever arrive.
- Would your retirement, housing, children’s education or emergency plans change?
If the honest answer is yes, consider a smaller amount, more liquid alternatives, or waiting. Also consider the emotional side: illiquid losses can be stressful because you cannot act on them.
Related
Your journey
More on this stage: Deep Dive: How 506(c) Accreditation Verification Works · Deep Dive: Calculating Net Worth Without Your Home · Deep Dive: Talking It Through as a Household
Start the next stage: Phase 2: Now you think you are an investor