Step #1 To Build Your Private Wealth Plan

By Wayne Mulligan, on Thursday, June 25, 2020

This is it!

This is the final article in your “Private Portfolio Makeover” series.

For the last two weeks, we’ve shown you how to take a small piece of your public-market portfolio…

And replace it with ultra-profitable private-market investments.

As you’ve seen, this could help you earn big returns… with much lower volatility!

Meaning, not only could you make more money, but you could also sleep better at night.

But maybe you still have questions about how to get started. For example:

  • How much money should you put into each private asset class?
  • How many investments should you make in total?
  • And how much should you invest into each deal?

Well, that’s exactly what I’ll cover today!

Three Steps to Investing Success

When it comes to building a private-market portfolio, there’s one simple step you can take today that could help you reap massive rewards down the road.

As you’ll see, not only will this step help you reduce your risk…

But it could also help you increase your returns as well.

This step is coming up with your “Asset Allocation Plan. This plan will dictate:

  • How much capital you’ll invest into private market investments in total.
  • How much you’ll invest into each private asset class we’ve gone over: private startups, private bonds, and private real estate deals.
  • And finally, this plan will dictate how much capital you’ll invest into each deal.

By setting this plan up correctly from the start, you’ll ensure that you never suffer big losses —and you’ll increase your chances of earning big returns.

Here’s how it works...

How Much Should You Invest in the Private Market?

First you need to determine how much of your portfolio you’ll put into the private markets.

You see, private deals tend to be “illiquid.” That means you can’t just turn your shares into cash exactly when you want to.

Therefore, you should only be investing a small portion of your overall portfolio here.

How much should you invest?

Based on our analysis of academic studies and real-world investment results, we came up with a simple “Rule of Thumb”:

Take your age and subtract it from 80. Then divide the result by 2.

That gives you the maximum percentage of your overall portfolio you should put into private 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 private deals is 12.5% of your investable assets.

So if you have a portfolio worth $100,000, you might decide to invest 12.5%, or $12,500, into private market opportunities.

But to be clear, that doesn’t mean you should invest $12,500 into a single deal…

After all, to protect your downside and maximize your gains in the private market, one of the golden rules is diversification...

The Two Keys to Diversification

Basically, you should diversify your private investments in two key ways:

  1. First, diversify across multiple asset classes.
  2. Then diversify within each asset class.

For example, out of that $12,500 hypothetical private portfolio, let’s say you wanted to split your portfolio evenly between private startups, private bonds, and private real estate…

That means you’d allocate roughly $4,100 to each of them.

Next, within each asset class, you’ll want to invest in many individual deals.

For example, for private startups, studies have shown that being truly diversified means investing in anywhere from 25 to 50 startup deals.

So, if you plan to invest a total of about $4,000 into 25 startups, you’d invest about $160 into each one (25 x $160 = $4,000).

This diversification will help you dramatically reduce your risk. Basically, if a few of the deals don’t work out, you won’t lose all that much…

Furthermore, you’ll still have many opportunities to “hit homeruns” with your other deals.

Remember: private market investments can generate far higher returns than public investments… so even small amounts of money could turn into vast windfalls.

Case in point: early investors in companies like Facebook and Uber were able to turn just a few thousand dollars into millions!

Build Your Own Private Wealth Plan

We used the numbers above as simple illustrations to show how diversification works.

When you’re ready to set up your plan, you can customize it based on your own goals.

For example, if your goal is to earn higher levels of income, you might consider putting:

  • 40% of your private portfolio into private bonds…
  • 40% into private real estate deals…
  • And just 20% into startups.

And if you’re looking to grow your money more aggressively, you might consider putting:

  • 60% to 70% of your private assets into startups.
  • And 15% to 20% into private bonds and private real estate.

Either way, take the time to consider your financial goals before committing to your plan.

It’ll pay dividends in the long run!

Happy investing.

Best Regards,



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Tags: Diversification Portfolio makeover

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