The stock market volatility index reached an all time high on Monday, March 16. The index has increased 500% this year. According to CNN, market activity is being driven by “extreme fear.”
After ten years of a rising market, this feels like a whole new world. Many investors became overconfident in the reliability of steady growth in their mutual funds. When my clients (small private companies) sought investment, they were competing with this seemingly predictable source of 8% plus returns.
The perception that an investment in a small, private business is riskier than a stock market investment is being challenged for the first time in many years.
Now we are being reminded that what the markets give, they can quickly take away. My mantra has always been that all investments are risky—there is no sure thing. The perception that an investment in a small, private business is riskier than a stock market investment is being challenged for the first time in many years.
Many investors may now be looking for an alternative and a way to diversify. There will likely be a growing demand for direct investments in businesses we understand and trust.
If you’re raising money for your business, your biggest competitor (i.e. Wall Street) is not looking very good right now. Take the opportunity to remind your potential investors that this is a great time to move investment dollars out of the volatile public markets and into a business that is values-aligned and run by someone they know and trust.