If you’re anything like me, you know that the word “private” is code for “special people only”, and you also know that something being “private” only makes it more desirable. Private golf clubs, private parties, private bathrooms - I want in! Unsurprisingly, the same is true in investing.

I’m talking about private assets - a whole world of investments that, up until very recently, was only accessible to the biggest investors in the world. But now, the world of private assets is starting to open up to everyday investors like you and me. That makes it important to learn what they are, what makes them special, and why you might want to invest in them.

Ready to get a peek behind the curtain into “Le Club de Assets Privé”? That’s terrible French for “The Club of Private Assets”. I wasn’t allowed into the private French club at school, clearly.

Public vs. private assets -
what’s the difference?

Public investment asset classes are investments that are traded on public markets, like the stock market. This means that anyone can buy or sell them pretty easily, usually through a broker or online platform. Examples of public assets are:

• Stocks: When you buy a share of a company like Apple or Google, (both public companies) you’re buying some public equity (also known as stock).

• Bonds: When you buy a government or corporate bond, you’re lending money to the government or a company through a publicly listed IOU, which means they owe you interest.

You can also buy mutual funds and ETFs (exchange-traded funds), which are collections of public stocks and bonds managed by professionals.

Okayyy, what about private assets?

Private investments are NOT traded on public markets, like stock exchanges. These are usually harder to sell and historically only available to wealthy investors. Some examples include:

• Private equity: your favorite local taco place, that roofing company that charged you an insane amount - these are private businesses! Investing in private businesses is called private equity. Many large public companies started as private companies. Google, Facebook, and Uber were all private companies before they “went public” and let people buy shares of their businesses on stock markets.

  

• Real estate: your house, your parents’ house, and probably even the office building you work in - these are all private real estate investments. Your house doesn’t trade on an exchange with a price that is always known. You only know how much it’s worth in reality when you go to sell it. That’s a key feature of private assets.

• Venture capital: this is a kind of private equity investing that focuses on start-ups and other young companies. At one point, Facebook was a brand-new company worth basically nothing. Imagine investing then! Well, some people did. Investing in early companies is especially risky, but the potential rewards are huge.

So basically, public assets can be bought and sold at any time with relative ease, while private investments can be trickier to buy or sell, but you can invest in some much different stuff than public assets.

What are the pros and cons of each?

Public assets

Pros

• Easy to buy and sell: You have quick access to your money if you want it.
  

• Lots of information available: By law, public investments make lots of information about themselves easily accessible.

Cons

• Volatility: Public investments always have their prices updated every second during business hours. Because of this, their prices can swing massively with news. Interesting example - when Starbucks announced they were bringing on the CEO of Chipotle, Starbucks’ stock went up by 25% - in one day!

  

  
  

• Can be overwhelming: There are tens of thousands of stocks - it can be hard to pick!

Private assets

Pros

• Potentially higher returns: Things like venture capital offer higher potential returns - imagine investing in Facebook the year it was founded in 2004, you would have (counts on fingers)… more money.
  

• Less volatility: Because private investments aren’t priced continuously on public exchanges like the stock market they look less volatile - this can minimize the anxiety of watching your investments all the time.

Cons

• Hard to sell: Because there’s no public exchange they’re more difficult to sell.
  

• Higher risk: Remember that early investment in Facebook? Well for that one dream scenario (imagine the cash) there are a million flops where someone invested and lost all their money.

How do I use both publics and privates?

Excellent question! Both public and private investments have their uses:

• Public investments give you easy access to your money while still offering growth. Because of this, public investments are good for short and medium-term financial goals.
  

• Private investments can add even more growth but are best suited for long-term goals since they’re more difficult to sell.

I’m intrigued, beguiled even.
How do I invest in private assets?

It’s harder, but not impossible.

A good platform to check out is Fundrise. This is a pretty sleek online platform where you can invest in things like private companies, real estate, and even loans. With over 2 million users on their platform, they’ve got a solid following.

Not an advertisement! They aren’t paying us! Just an idea. 

Sooo are private assets really for special people only?

Not anymore! So it’s good to learn about what makes them different and how you should think about investing in them. They aren’t the solution to everything, but adding them to your portfolio could be a good way to help reach your goals.