Public versus Private: A View for Individual Investors

As individual investors look for new ways to grow and diversify their portfolios, private investments have become an increasingly common topic of interest. These include private equity, venture capital, private credit, and real assets that are not listed on public exchanges. While private investments can offer attractive long-term returns, they also come with trade-offs—especially when compared to the more liquid, accessible, and transparent public markets.

The Allure of Private Investments

Private investments are often seen as an opportunity to access returns beyond what traditional markets typically offer. High-profile private equity and venture capital stories can certainly capture the imagination—“unicorn” companies and outsized gains have become part of mainstream investing conversations. In some cases, investors may also benefit from what’s known as the illiquidity premium—the idea that tying up your money for a long time might result in higher returns as compensation.

There’s also something enticing about the perception of exclusivity—the feeling of investing like an endowment or large institution. Much like the buzz surrounding cryptocurrencies, marijuana stocks, or other cocktail-party favorites over the years, private investments often carry the allure of “getting in early” on the next big thing.

But at What Cost?

Despite the upside potential, private investments do come with observable drawbacks. The most significant is illiquidity. When you commit to a private fund, your money is typically locked up for 5 to 10 years. And that’s if everything goes as planned. Many private investments have additional illiquid phases that vary by project or strategy, and those timelines can stretch further depending on economic or company-specific developments. If you value flexibility or might need access to funds unexpectedly, this can be a serious drawback.

Fees are another consideration. Many private funds use a “2 and 20” structure—2% annually on your committed capital and 20% of the profits. That’s a far cry from the low fees now common in public index funds and ETFs. If the private investment underperforms or even just matches the public market, those higher costs can be a drag on your overall return.

Accessibility is also limited. Minimum investments often start in the hundreds of thousands of dollars, placing many private funds out of reach for the typical investor.

Then there is the matter of valuation. Unlike public stocks, which are priced in real time, private investments are usually valued using internal models and updated infrequently. That makes it hard to know what your investment is truly worth at any given moment. This can give the illusion of less volatility—but it’s more likely a case of “out of sight, out of mind.”

Take, for example, a privately owned home. Most investors don’t regularly mark down their home’s value when markets soften. Instead, the value on the balance sheet typically reflects the last known appraisal or a conservative estimate of appreciation. But there’s a whole asset class—residential REITs (Real Estate Investment Trusts)—that own baskets of properties like those homes. These REITs are publicly traded and priced daily, with values influenced by market sentiment, interest rates, and broader economic factors. It would be hard to argue that a privately owned property is immune to those same dynamics, even if it isn’t repriced every day.

Why Public Investments Still Matter

Public markets—stocks, bonds, ETFs, and mutual funds—offer some important advantages. They’re highly liquid, cost-effective, and transparent. You can build a diversified portfolio at virtually any size, and you can see what it’s worth every day.

You also gain tactical flexibility. If your goals shift or the market changes, you can rebalance, exit, or reinvest easily—none of which is true for most private holdings.

Conclusion

There’s no denying that significant wealth has been created in private markets. And in certain situations, particularly when someone brings deep knowledge or local insight to a private opportunity, individual investments can outperform their public counterparts. But as capital grows and gets redeployed across more deals, the odds of underperformance—or at least uneven results—increase.

That’s why public markets remain such a valuable foundation. They offer a practical, scalable, and efficient path to long-term wealth creation. For investors with significant resources, long-term horizons, and an appetite for complexity, private investments can be a complementary piece of the portfolio. But for most, the transparency, accessibility, and simplicity of public investments make them a more useful starting point.

As always, working with a trusted advisor who understands your goals—and how different asset types fit into your overall picture—can help ensure your strategy is aligned for the long haul.

John Wade Therrell III, CFP®, is an Investment Counselor at Leavell Investments. John Wade has been with the firm since 2015 after a successful 10-year career in the banking industry. He earned his CERTIFIED FINANCIAL PLANNER™ designation in 2018 and he became an approved advisor for the NFL Players Association in 2024. John Wade also serves in various leadership roles within the firm, including the Board of Directors and the Executive Committee. John Wade holds a B.A. from Rhodes College as well as a graduate degree in banking from the Southwestern Graduate School of Banking (SWGSB) at SMU. Educational honors include receiving the SWGSB 2015 President’s award. John Wade was also a 2011 member of Mobile’s 40 Under 40 Class and is involved in a variety of civic and business organizations along the Gulf Coast.

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Important Disclosures: The statements and opinions expressed in this article are those of the authors as of the date of the article, are subject to rapid change as economic and market conditions dictate, and do not necessarily represent the views of Leavell Investment Management, Inc. This article does not constitute investment advice, is not predictive of future performance, and should not be construed as an offer to sell or a solicitation to buy any security or make an offer where otherwise unlawful. Investing in securities carries risk including the possible loss of principal. Individual circumstances vary. Past performance is no guarantee of future results.