Reason #1 of 52 to invest in Venture

It’s 2024, and Doriot is releasing 52 reasons – one each week – explaining why wealth builders should amass a venture portfolio (not to exceed 8% of their net worth). A venture portfolio is an equity stake in the future. With major technology advancements expected over the next few decades, there arises an opportunity to exponentially increasing your wealth by purchasing stock in the entrepreneurs and visionaries who are harnessing these technologies to build and shape our collective future.

The Misconception

A common misconception, especially among young people, is that one must be “rich” or “special” to invest in startups. This belief is partly fueled by the media portrayal of venture capitalists (VCs) and angel investors as exclusive, almost celebrity-like figures. But this image is a far cry from reality. Startup investing isn’t reserved for a select few; it's becoming increasingly accessible to anyone willing to embark on the journey.

The Decision

The first step towards startup investing is a simple yet profound one: deciding to be a venture investor. This decision is more about mindset than it is about current financial status. It's about shifting focus from immediate consumption to long-term wealth building.

The Magic

The magic of wealth building lies in two key ingredients: compound interest and time. The longer you let your money work for you, and the higher the annual return, the more wealth you accumulate. Historically, the stock market has offered 10% returns, while venture investments have yielded 20% returns.

Factoring In Inflation

Inflation is an unavoidable factor in financial planning. With the purchasing power of the US Dollar decreasing by about 8% each year, traditional savings methods become less effective. For example, if you save $10,000 in a standard savings account, after thirty years, you could lose nearly 40% of its purchasing power due to inflation.

How a Small Venture Allocation Can Double Your Retirement

Venture investing offers an opportunity to outpace inflation and significantly increase your wealth over time. By carefully selecting and investing in promising startups, you can tap into the potential for high returns. This doesn’t mean disregarding risks, but rather managing them through diversification and informed decision-making.

Consider this scenario: you aim to save $10,000 for retirement over the next four years. This goal requires a shift in focus from spending to saving and investing – approximately $2,500 per year.

For individuals aged 45 or younger, this opens up a 25-45 year horizon to build wealth for retirement. Let's explore a strategic capital allocation scenario over a thirty-year horizon:

• As mentioned above, placing $10,000 in a savings account will likely result in a purchasing power of about $6,159 in thirty years, considering inflation.

• By investing 92% of your $10,000 (i.e., $9,200) in the stock market, such as the S&P 500, and assuming a 10% annualized return, this amount could grow to a purchasing power of $143,000 in thirty years.

• By allocating the remaining 8% ($800) to venture investments, with an assumed 20% annualized return, could result in a purchasing power of $188,000 in the same period.

The following table illustrates these scenarios:

Yes, allocating just $800 (8%) to venture investment could potentially double the value of your $10,000 retirement allocation as compared to 100% invested in the Stock Market, thanks to diversification, reinvestment, and tax strategies!

However, due to the inherent risks in venture investing, it is prudent to maintain this allocation at 8% of your net worth. At Doriot, we’ve authored a White Paper highlighting the importance of not exceeding this 8% threshold. This approach maximizes return potential while minimizing risk through diversification.

Doriot is preparing retail investors for the third wave of venture: smart, decentralized, on-chain venture investing (including diversification and tax strategies). This shift will democratize access to top-tier venture deals, making them available to a broader range of investors, not just millionaires.

To learn more about enhancing your wealth through Venture, consider signing up for Doriot Venture Club’s free newsletter here: