In the world of banking and investment opportunities there are many directions you can take depending on your personal goals and finances. Finding what best suits you and your investing goals is vital to gaining exponential growth in your numbers.
Gaining monetary control within a business without having to purchase any shares can best describe what direct investing is. As a direct investor you have actual input in the company’s business decision making by participating in the overall management. Another option in direct investing is joining a few other possible investors and creating a new entity party, and as a group you can contribute to the growth and direction of the company.
Large Investment Return
A key advantage of taking part in a direct investment is getting a larger sum on your return. You can expect a much bigger return than if you would have purchased stocks because by direct investing you are purchasing a larger percentage of the company’s worth. Researching your return potential is vital before signing over the papers. Avoiding open ended or long term agreements is great advice to keep in mind while searching for the perfect investment opportunity.
Another perk in making a direct investment is having the capability to participate directly in business management. As an investor you have the legal right to take part in management meetings, having your opinions heard. Buying a greater percentage of the company is also a possibly, with the ability to buy out partners. Other rules include partners getting board approval before selling off their shares. Direct investors can create agreements allowing them to end partnerships or sell shares without the approval of the board. They can also manage their portfolios online and are free from high brokerage fees.
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One disadvantage important to mention is the high risk factor. Owning stocks you have the option to set-up a stop-loss on your investment – the same rule doesn’t apply to direct investors. The responsibility for any business failures will have a direct impact on your shares. Being well versed and pro-active in business ventures will help safeguard the outcomes.
A great way to minimize liability is to become a general partner within the company. As a general partner you can minimize risk by having a greater influence on your partners’ decision making. The risk of being sued or paying fines comes with the territory. Another option is becoming a limited partner, in which you are safe from any liability but with a less active role in making important business decisions.