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What is a Private Sector Investment?

Keith Koons
Keith Koons

A private sector investment is the process of investing in a commodity that is not traded publicly. In many cases, this refers to a private business that has a limited number of shareholders, but the term can also be used to describe many other scenarios. For example, if an investor purchased a collection of valuables from another person, this would qualify as well. Another popular area for this type of investment is within the healthcare, regulation, and education fields to improve the standard of living for a certain region.

The type of private sector investment that consumers are often most familiar with involves businesses that are looking to expand. If the company is not large enough to be traded publicly, but it needs an influx of money to remain profitable, it can hand pick investors who can help meet its needs. Financial institutions are the most reputable businesses that make such investments, but private lenders are often called on as well. One example of an industry that thrives almost solely on these investors is the Internet; most of the existing websites would not be here without it.

Man climbing a rope
Man climbing a rope

Another type of investment comes from a commodities dealer. The product could be anything from corn or wheat to diamonds and other valuables; the value of the investment does not really matter. This type deals with buying goods directly from the source and holding them until they can be sold for a profit. As long as the product is purchased for financial gain, then it fits the definition. There are many private sector businesses that cater to these types of clients.

One of the most important types of private sector investments do not involve monetary profit at all. Instead, investors look for private businesses that strive to make the world a better place. This would include places like schools, research organizations, medical clinics, and many other entities that provide services that could possibly raise the quality of life for some regions.

For example, this type of investment could include giving funds to a medical center that provides services for low income families. Even though the investor might not have personally profited from the transaction, the people who use the services of the clinic receive better care because of it. While many would consider this act more of a loan or a donation, it still qualifies since there are measurable results because of it.

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