Investment in companies that are not publicly traded on stock exchanges. Private equity firms typically buy entire companies or large stakes in them, improve their operations, and then sell them later for a profit. These investments are only available to wealthy individuals and institutions, and your money is typically locked up for many years.
A private equity firm raises $1 billion from wealthy investors and uses it to buy a chain of 50 restaurants for $500 million. Over five years, the firm improves the restaurants' operations and opens new locations. When they eventually sell the company for $1 billion, the original investors receive their share of the profits.
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