Should You Invest in this “$500 Venture Fund”?

You're receiving this email as part of your subscription to Crowdability, which you signed up for on 2020-10-08 04:09. [Unsubscribe here](. [Crowdability]( [feature] Should You Invest in this “$500 Venture Fund”? Wayne Mulligan Venture capital funds are basically like mutual funds for startups… And they’ve become one of the hottest and most exclusive investments on the planet. Many top funds boast returns that trounce the market, and even outperform Warren Buffett. That’s why it’s so difficult for even the wealthiest investors to grab a stake in one of them. But last week, there was an exciting announcement: Not only is a high-profile tech investor launching a new venture fund… But she’s allowing individual investors like you to invest in it — for as little as $500! But before you plunge in head-first, let me give you a deeper look at what’s going on here… Mutual Funds for Startups To kick things off here, let’s take a step back… What exactly is a venture capital fund? As I mentioned earlier, it’s similar to a mutual fund. But instead of investing in a basket of stocks, it invests in a basket of startups. And by getting into these companies at their earliest stages, these funds aim to produce much higher returns than a typical mutual fund — and historically, many of them have. For instance, research firm Pitchbook reported that, in 2020, venture funds delivered returns of 33%. That’s about double what the S&P returned that year! VIP Members Only! Given their performance, it’s no wonder these funds have been so difficult to get into. But that’s not the only reason they’ve been out of reach for most investors… You see, for decades, only the wealthiest investors could get access to such funds. That’s because, generally speaking, not only did you need to be a “qualified investor” — meaning, you needed to have a net worth of at least $2 million… But you also needed to commit a huge amount of money. According to Investopedia, investment minimums could be as high as $25 million and as “low” as $250,000. Which is why, historically, most venture fund investors have been institutions like banks, endowments and pension funds, or ultra-high net worth individuals. But thanks to one woman, that’s all changing… The “Money Tree” Cathie Wood has become a financial media-darling over the past few years. She began her career at Jennison Associates, a division of Prudential Investment Management. But in 2001, she joined AllianceBernstein as Chief Investment Officer and started to invest in tech stocks. And that’s when her star really began to rise. In 2014, she struck out on her own to found ARK Invest, a family of ETFs focused on high-growth tech companies. In 2020, Bloomberg News named her the top stock picker of the year. As her reputation and track record grew, many began calling her “Money Tree.” And now she’s looking to enhance her reputation even further… Introducing: ARK Venture Last week, Cathie announced the launch of her newest fund, ARK Venture. Similar to her previous funds, ARK Venture will aim to capitalize on massive tech innovations. But instead of investing strictly in publicly traded stocks, ARK Venture will also invest in pre-IPO companies — i.e., startups. Furthermore, instead of limiting access to rich insiders, ARK Venture will be open to all. And instead of six- or seven-figure minimums, this fund will accept investments as small as $500! Essentially, this will be one of the world’s first publicly-available venture-capital funds. So now everyone will have the chance to get in on “the next Uber,” “the next Amazon,” or “the next Tesla” at their earliest stages… And hopefully, earn enormous returns. All That Glitters Isn’t Gold This might sound like great news… But I’d urge you to dig deeper before putting your capital at risk here. First of all, ARK Invest’s recent results have been less than stellar. According to one report, on an annualized basis, its ETFs have trailed the S&P for the past five years. And as of this summer, some of its ETFs were down roughly 70% from their peaks. Furthermore, this poor performance comes from investing in public stocks. In other words, large companies with years of operating history. But ARK Venture will also be backing private startups. These are companies with very little operating history and no publicly-available data to base decisions on. If Ms. Wood can’t outperform the market with her public stock investments, why should we believe she’ll be able to do so with her private investments — investments that typically require much more research, legwork, and experience to get involved with? On top of all that, unlike her other funds, ARK Venture is not liquid. In other words, you can’t just pull out your money if you need it for groceries or to pay the rent. Instead, you’re limited to a quarterly request to liquidate 5% of your holdings. Sometimes, the Best Investment is No Investment Bottom line: It might not be best to plunge into this investment right out of the gate. We’d caution you to take a more measured “wait and see” approach. In the meantime, if you’re curious to learn more, you can [view a full write up of the opportunity here »]( Happy investing. Best Regards, [Wayne Mulligan] Wayne Mulligan Founder Crowdability.com [Click Here to Leave a Comment for Wayne »]( [related] - [13 Reasons Now’s the Time to Invest in Startups]( - [Buy the iPhone 14… and buy Apple stock]( - [R.I.P. 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