Startup Funding Espresso -- Asset Allocation
Asset Allocation Hello, this is Hall T. Martin with the Startup Funding Espresso -- your daily shot of startup funding and investing. In angel investing, it\u2019s important to set aside funds for startup investments. In most cases, investors dedicate 5%-15% of their discretionary funds to angel investing. There are several issues with asset allocation for angel investing compared to publicly-traded stocks, bonds, and mutual funds. Startup investments are illiquid as there\u2019s no market for reselling. Transferring stock is greatly limited due to SEC rules. To achieve a gain, you must hold the stock for up to 7-10 years in most cases. Many startups fail completely and are tax write-offs. Determine upfront how much you want to invest based on 5%-15% of your portfolio. Divide by ten to get the total number of startups you can invest in.\xa0 Divide the investment amount by 2 to get the initial investment per startup, leaving the second half for a follow-on round.\xa0 Here\u2019s an example: Let\u2019s say I have a portfolio of $3.5M\xa0 15% of $3.5M yields $525K to invest in startups Dividing $525K by 10 gives me $52K per startup that I can invest in. Dividing the $52,500 by 2 means I can invest $26K for each startup leaving another $26K for each follow on investment. Start with 3 investments per year.\xa0\xa0\xa0 It\u2019s important to be selective. After a few years and some gains, you can re-invest some of the profits into more startups.\xa0\xa0 There are tax laws that make it attractive to roll your gains from one startup investment into another.\xa0 Thank you for joining us for the Startup Funding Espresso where we help startups and investors connect for funding.Let\u2019s go startup something today. ___________________________________ For more episodes from Investor Connect, please visit the site at: \xa0 Check out our other podcasts here: \xa0 For Investors check out: \xa0 For Startups check out: \xa0 For eGuides check out: \xa0 For upcoming Events, check out \xa0\xa0 For Feedback please contact info@tencapital.group\xa0\xa0\xa0 Please , share, and leave a review. Music courtesy of .