What are Private Investments?

May 5, 2023
Estimated Reading Time: 8 Minutes

Private investments refer to investments made in private companies that are not publicly traded on a stock exchange. Private investments are typically made by high-net-worth individuals, venture capitalists, and private equity firms.

Private investments can take many forms, including equity investments, debt investments, or a combination of both. Equity investments involve buying ownership in a company, while debt investments involve lending money to a company with the expectation of receiving interest payments and eventual repayment of the principal.

Private investments can offer investors the potential for higher returns than public investments, but they also typically carry higher risks due to the lack of publicly available information about the company and the absence of regulatory oversight. Private investments can also be illiquid, meaning that it may be difficult to sell the investment and get your money back quickly.

What are the Different Kinds of Private Investments?

There are several types of private investments that investors can consider, including:

Private Equity

Private equity investments involve buying ownership in private companies with the aim of helping to grow and improve the company's operations, and then selling the investment for a profit. Private equity investments can take various forms, including leveraged buyouts, growth capital, and distressed debt.

Venture Capital

Venture capital investments are typically made in early-stage companies with high growth potential. Venture capitalists invest in these companies in exchange for equity, with the aim of helping them grow and eventually become successful businesses.

Real Estate

Private real estate investments involve investing in private property, such as apartment buildings, commercial real estate, or residential properties, with the aim of generating rental income and appreciation in property value.

Hedge Funds

Hedge funds are private investment funds that typically use more complex investment strategies than traditional long-only investments in stocks and bonds. Hedge funds may use leverage, short-selling, or derivatives to generate returns, and often have high minimum investment requirements and limited liquidity.

Private Debt

Private debt investments involve lending money to private companies or individuals in exchange for interest payments and eventual repayment of principal. Private debt investments can include senior secured loans, mezzanine loans, and distressed debt.

Private Placements

Private placements involve selling securities, such as stocks or bonds, directly to a select group of accredited investors. Private placements are often used by private companies to raise capital without going public.

How Can Private Investments Benefit your Portfolio?

Private investments can potentially help your portfolio in a few ways:


Private investments can help diversify your portfolio beyond traditional publicly traded stocks and bonds. By investing in private companies, you can gain exposure to different industries, geographies, and investment strategies that may not be available in the public markets.

Potential for Higher Returns

Private investments can offer the potential for higher returns than public investments. Private companies may have the ability to grow faster and generate higher profits than public companies due to their smaller size and greater flexibility. Additionally, private investments may provide access to emerging technologies and industries that are not yet publicly traded.

Lower Correlation to Public Markets

Private investments may have lower correlation to public markets, meaning that they may not move in tandem with the broader market. This can help reduce the overall risk of your portfolio and potentially improve its performance.

What are the Risks of Private Investments?

Private investments carry several risks that investors should be aware of before investing. Some of the common risks associated with private investments include:

Lack of Liquidity

Private investments are often illiquid, meaning that they cannot be easily sold or traded on a public market. This lack of liquidity can make it difficult to access your money when you need it.

Higher Risk

Private investments are generally considered to be riskier than publicly traded investments. Private companies are typically smaller and less established than public companies, and may have a higher likelihood of failure. Additionally, private investments may not be subject to the same level of regulatory oversight as publicly traded investments, which can increase the risk of fraud or other mismanagement.

Limited Information

Private companies are not required to disclose the same level of information as publicly traded companies. This can make it difficult for investors to fully evaluate the investment opportunity and assess the risks.

Difficulty in Valuation

Private investments are often difficult to value, as there is no public market for the investment. This can make it challenging to accurately assess the investment's worth and determine an appropriate price.

It's important for investors to carefully evaluate the potential risks and benefits of private investments before investing. Investors should also work with a qualified financial advisor who can help them assess the risks and determine whether private investments are appropriate for their investment goals and risk tolerance. Additionally, private investments are generally only available to accredited investors who meet certain net worth and income requirements.

How Do I Know if I Should Consider Private Investments?

Determining whether private investments are right for you depends on a number of factors, including your investment goals, risk tolerance, and financial situation. Here are some questions to consider when deciding whether to look into private investments:

  1. What are your investment goals? Private investments can be attractive to investors seeking higher potential returns and diversification beyond traditional publicly traded stocks and bonds. If your investment goals align with these objectives, private investments may be worth exploring.
  2. What is your risk tolerance? Private investments are generally considered to be riskier than publicly traded investments due to their lack of liquidity and limited information. If you are comfortable taking on higher levels of risk in pursuit of potentially higher returns, private investments may be appropriate for you.
  3. What is your financial situation? Private investments often require a significant amount of capital, and are typically only available to accredited investors who meet certain net worth and income requirements. If you have the financial resources to invest in private opportunities and are comfortable with the risks, private investments may be a suitable option.
  4. Have you worked with a qualified financial advisor? Private investments can be complex and challenging to evaluate. It's important to work with a qualified financial advisor who can help you assess the risks and determine whether private investments align with your investment goals and risk tolerance.

Ultimately, the decision to invest in private investments should be based on a careful evaluation of the potential risks and benefits, as well as an understanding of your own investment goals and risk tolerance. If you are interested in exploring private investment options, you can use this form to get in touch with one of our advisors.

Important Disclosure Information

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