Private vs. Public Investments: Same Destination, Different Roads

When it comes to building a strong investment portfolio, you’ve probably heard about public investments (the familiar stocks, bonds, ETFs) and maybe more recently, private investments.

Private investments — used extensively by large pension funds — include private equity, real estate projects, and private debt. We use both in our clients’ portfolios because they serve different purposes.

Think of it like travel:

• Public investments are like the main highway — open to everyone, easy to get on and off.
• Private investments are more like a scenic back road — often with more rewarding views, but you’re committing to the ride.



Let’s break it down.

1. Public Investments — The Open Highway

Public investments are traded on well-known exchanges like the TSX, NYSE, or NASDAQ.

Examples:

• Stocks — a small ownership piece of a company.
• Bonds — you lend money to governments or corporations, and they (hopefully) return it with interest.
• ETFs & Mutual Funds — bundles of investments for instant diversification.

Pros:

• Easy access — buy or sell in a day, like online shopping (without the late-night impulse buys).
• Transparent pricing — you can check prices anytime (though it’s healthier not to check 87 times a day).
• Low entry point — you don’t need a large amount to get started.

Cons:

• Volatility — prices can jump around like a toddler on a sugar rush.
• Market swings — can make even calm investors nervous.
• Emotional risk — buying high and selling low is a common (and costly) mistake.

2. Private Investments — The Scenic Back Road

Private investments aren’t traded on public exchanges, so they follow different rules.

Examples:

• Private equity — ownership in non-public companies.
• Private real estate — commercial buildings, developments, rental projects.
• Private credit/debt — lending directly to businesses or developers.
• Venture capital — backing start-ups with big potential (and big risk).

Pros:

• Potentially higher returns — sometimes the scenic road leads to a five-star resort.
• Diversification — performance often differs from public markets.
• Exclusive opportunities — access to deals not available on the open market.

Cons:

• Illiquidity — your money is tied up for years, not days.
• Higher risk — projects can fail or underperform.
• Less oversight — fewer regulations and reporting requirements.

3. How They Work Together

Think of public investments as your daily bread — reliable and always available.
Think of private investments as your specialty dessert — richer and potentially more satisfying, but best enjoyed in moderation.

A healthy portfolio can have both:

• Public investments for flexibility, liquidity, and steady income.
• Private investments for long-term growth potential and diversification.

Bottom Line:
It’s not about public vs. private — it’s about finding the right balance for your goals, time horizon, and comfort with risk.

When your portfolio has the right mix, you can enjoy the journey — whether you’re cruising the highway or soaking in the views along the scenic route.

Source: www.bloomberg.com