Editor’s Note: Welcome to Week 3 of your Private Market Bootcamp! During the month of July, we’ll be sharing this powerful investing system with you, for free. This system can help you find and fund high-potential startups when they’re just getting off the ground — and could put you in position to pocket huge gains when their value skyrockets.
Last week, we shared a crucial investing “secret” with you:
We showed you how to identify the startup investments that could hand you gains of 1,000% — that’s 10x your money.
With gains like that, you might be tempted to invest all your money into startup deals. But there’s no need to do that. Actually, it would be a mistake.
So today, I’ll show you exactly how much of your portfolio to allocate to startups…
And exactly how much to invest into each deal.
Your Early-Stage Investment Strategy
Before you make your first startup investment, you need a plan.
More specifically, you need an Asset Allocation plan.
This plan will dictate:
- How much capital you’ll invest into startups overall.
- And how much you’ll invest into each deal.
This plan is the single-most important part of startup investing.
By setting it up correctly, you’ll ensure that you never suffer big losses — and at the same time, you’ll increase your chances of maximizing your profits.
Here’s how it works...
How Much To Invest in Startups
First you need to determine how much of your overall portfolio to invest in startups.
Investing in startups is a higher-risk, higher-return opportunity than investing in traditional asset classes like stocks or bonds…
Therefore, you should only be investing a small portion of your overall portfolio into these deals.
How much should you invest? Well, after doing extensive research, we came up with a simple “Rule of Thumb”:
Take your age and subtract it from 80. Then divide the result by 2.
This gives you the maximum percentage of your overall portfolio you should put into startup deals.
For example, let’s say you’re 55-years-old.
80 – 55 = 25.
25 ÷ 2 = 12.5
In other words, if you’re 55-years-old, the most you should invest into startups is 12.5% of your investable assets.
So if you have a portfolio worth $100,000, that means you’d invest 12.5% of it into startups. That’s $12,500.
But that doesn’t mean you should invest $12,500 into a single deal…
You see, with startup investing, the way to protect your downside and maximize your gains is through diversification.
The Key: Diversification
So, how many investments does it take to be “diversified”?
According to numerous studies — and based on the real-world strategies of professional investors — you should aim to build a portfolio of at least 25 to 50 startup deals.
So, continuing from the example above, if you plan to invest $12,500 into startups overall, you should invest $250 to $500 into each deal.
If you “fall in love” with a particular deal, you might be tempted to invest more. But we’d urge you never to do that. With startup investing, you need to stick to a system.
As long as you follow the Asset Allocation plan you just learned about, even if a handful of your investments don’t work out, you won’t lose significant capital…
And you’ll still be able to maximize the gains from your “winners” that return 10x or more!
Get Ready
Today you learned how to put together your startup investing plan:
First, determine how much of your overall portfolio to invest in startups. Then figure out how much to invest into each deal.
This is a crucial piece of the puzzle…
But if you’ve been following our Private Market Bootcamp for the past few weeks, now you know that it’s just one of many important pieces.
That’s why, tomorrow, Wayne will start putting together the whole puzzle for you — including the biggest piece of all:
Showing you how much you could potentially earn when you do it correctly!
So stay tuned…
Best Regards,
Founder
Crowdability.com
