You know an expert in which wines were rare and underpriced at the liquor store and bound to be a good value, increase in price and be the most delicious.
You hear they were going to the store for a big order, so of course you give them your credit card and have them pick up some extra of whatever he was buying for you.
You would probably also offer to buy them a bottle of whatever they wanted, or pay for their gas there and back.
It would be a good investment, because they are bringing expertise and hard work to the table in order to deliver value.
If you went yourself, you would have to do a bunch of research, drive there and purchase it, and likely buy average, or even scarier, horrible tasting wine.
You might even ask the store clerk which wines were the best, and they might give you good advice, but they could be motivated by conflicts of interest like kickbacks etc. resulting in mediocre, overpriced wine for you.
This concept is the basis for any investment fund.
"Funds" in this context is a group of investments selected by a manager.
Examples: private equity funds, venture funds, real estate funds, mutual funds, etc.
Even huge index funds fit this description like the S&P 500 or the NASDAQ, which are groups of stocks selected based on specific criteria like market cap and sector, but which are curated by the index manager.
Investors want to invest their money alongside a seasoned investor who is motivated to create the highest returns using their expertise.
People want to co-invest with someone who knows what they are doing, because that leads to higher returns and lowered risk. And they are willing to pay for that privilege.
The wealthiest families in the world create groups and invest alongside each-other, springboarding off of each other's expertise and networks in order to create massive returns and substantially lower risk, all while using economies of scale to reduce fees and cut out the middle man.
This is like forming a group where one person is the head wine expert, one is the cheese expert, one is the steak expert, one is the décor expert.
Everyone pools their money and expertise.
They hire a team to do the legwork of buying what's on the shopping list and prepping the food, exploiting economies of scale.
There are no conflict of interest, because everyone wants to contribute to the best dinner possible - they will all sit down to eat together; a great meal is the reward they all seek.
Dinner is going to be very nice, every night.
Who wouldn't join that group?
The problem is, where to find a legitimate group of these highly qualified experts that would allow you to join?
To be continued.
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