Private Equity vs. Public Markets: Where Should You Invest?

Investors today have more options than ever when it comes to building their portfolios. While public markets—like the stock exchange—remain a top choice, private equity has gained traction as a powerful alternative. But which one is right for you?

That’s what we’ll try to help you find out today. Understanding the differences between private equity and public markets is key when deciding which one you should invest in. While both have the potential for attractive returns, they also come with significant differences in terms of accessibility, liquidity, and risk. 

This guide will break down each option, weigh its pros and cons, and explore how it fits into a well-rounded investment strategy.

At a Glance: Private Equity vs Public Markets

In a hurry? Here’s a quick look at the key differences between private equity and public market investments:

What Is Private Equity?

Private equity (PE) refers to investments in companies not publicly traded on stock exchanges. Instead of buying and selling shares in a public marketplace, PE investors acquire ownership stakes in businesses directly.

Private equity firms pool capital from institutional investors, pension funds, and high-net-worth individuals to invest in companies with the goal of improving their performance before selling them for a profit. These firms actively manage businesses, implementing strategies to increase efficiency, profitability, and growth.

Private equity strategies include:

• Leveraged Buyouts (LBOs) – Acquiring companies using a mix of debt and equity to maximise returns.

• Venture Capital (VC) – Providing funding to early-stage startups with high growth potential.

• Growth Equity – Investing in established businesses looking to expand operations.

• Distressed Investing – Purchasing underperforming companies at a discount and restructuring them.

Unlike public market investing, private equity is a long-term commitment, typically lasting 5–10 years or more before investors see returns.

Benefits & Risks of Private Equity Investments

What Are Private Markets?

Public markets are exchanges where investors can buy and sell stocks, bonds, and other securities. Publicly traded companies must list their shares on stock exchanges like the New York Stock Exchange (NYSE), London Stock Exchange (LSE), or Nasdaq, allowing potential investors to buy and sell ownership stakes of those companies freely. 

Unlike private equity, public markets are highly regulated. Firms are required to provide regular financial disclosures, giving investors access to financial reports, earnings calls, and regulatory filings, helping them make informed decisions.

Public market investments include:

• Individual Stocks – Shares of publicly listed companies.

• Exchange-Traded Funds (ETFs) – Investment funds that track indexes or industries.

• Mutual Funds – Pooled funds managed by professionals, offering diversification.

Public exchanges are generally more liquid and accessible than private equity, making them a premier choice for new investors. 

Benefits & Risks of Private Market Investments

Investing In Private Equity vs Public Markets

Deciding whether to invest in private equity or public markets is not just about choosing one over the other—it’s about aligning your investment strategy with your financial goals, risk tolerance, and time horizon. 

Let’s explore the key factors that differentiate these two investment options:

Risk Tolerance

Private equity investments generally carry a higher risk due to their long-term nature and illiquidity. Since capital is locked in for 5–10 years or more, investors have no easy exit if market conditions shift or an investment underperforms. 

The valuation of private equity holdings is also less transparent, as pricing is determined by fund managers rather than public market dynamics. Success heavily depends on the firm’s ability to improve business operations, and in the case of failure, investors may experience significant losses, especially if they hold a concentrated portfolio.

Public market investments, on the other hand, are subject to daily volatility, with stock prices fluctuating due to economic conditions, company performance, and investor sentiment. While market downturns can cause temporary losses, investors have the flexibility to sell at any time, cutting losses or reallocating funds to stronger assets. 

Public markets are generally more diversified, reducing single-company risk, and even in the event of a business failure, shares can often be sold at a partial loss to preserve some capital.

Investment Horizon

Private equity requires a long-term commitment, with typical holding periods of 5–10 years before investors realise returns. Investments go through a structured cycle of acquisition, growth, and exit (via sale or IPO), meaning capital remains locked up for the entire time. 

Exiting early is complex and often costly, as it usually requires selling to another investor at a discount. While the long-term nature of private equity can lead to higher compounding gains, it requires patience and a strong financial position to withstand the wait.

Public markets, by contrast, provide greater flexibility, allowing investors to adjust their holdings at any time. Stocks and funds can be traded daily, making them suitable for both short-term and long-term investment strategies. 

Short-term investors can take advantage of market trends, dividend income, and price fluctuations, while long-term investors benefit from capital appreciation, reinvested dividends, and compound growth—all while maintaining the ability to exit at any time if needed.

Required Capital

Private equity investments typically require significant capital, with minimum buy-ins often starting from 100,000 EUR. Many funds are restricted to institutional investors and accredited high-net-worth individuals, making PE largely inaccessible to retail investors. 

While newer platforms now offer fractional ownership of private equity investments, they still require significantly larger capital commitments than public market investments.

Public markets, on the other hand, are highly accessible, and investors can start with as little as 100 EUR. Shares, ETFs, and mutual funds allow investors to scale their investments gradually rather than committing a lump sum upfront. 

The availability of low-cost index funds and fractional shares further lowers barriers to entry, making it easier to invest in diversified portfolios without large capital outlays.

Control & Involvement

Private equity investors often take an active role in the businesses they invest in, influencing strategic decisions, restructuring operations, and driving growth initiatives. 

The success of an investment depends heavily on the fund manager’s expertise and the firm’s ability to execute improvements and maximise profitability before an exit. Unlike public stocks, which can be held passively, private equity investments require more due diligence and involvement.

Public market investors, by contrast, are passive shareholders, meaning they have no direct control over company decisions. While shareholders can vote on corporate policies during annual general meetings (AGMs), their influence is limited, especially in large publicly traded companies. 

Portfolio management can be fully automated through passive investment strategies like index funds, making public markets a hands-off option for those who prefer minimal involvement.

Is There an Alternative?

Public markets and private equity may dominate the investment landscape, but they aren’t without drawbacks—especially for newcomers. The good news? They’re not your only option. Alternative investments provide a fresh way to diversify, and Splint Invest makes them more accessible than ever.

From fine art and whisky to rare LEGO sets and sports trading cards, alternative assets are gaining traction. They reduce portfolio risk, offer unique growth potential, and can act as an inflation hedge, with tangible assets often holding value in downturns.

Best of all? Unlike private equity’s high barriers to entry, you can start investing in alternatives with Splint Invest for as little as 50 EUR.

Final Word on Investing in Private Equity vs Public Markets

Private equity and public markets each have benefits and drawbacks. Private equity can deliver higher returns, but it demands patience and high capital. Public markets, on the other hand, offer liquidity and accessibility, but they also carry the risk of volatility.

For many investors, the key to success lies in diversification—a blend of private equity and public stocks. But there’s another type of investment that has gained popularity in the past few years—alternative assets like fine wine, LEGO, luxury watches, and rare cars. 

That said, the final question shouldn’t be about which type of investment you should choose but rather how to leverage them all for building a diversified portfolio. 

Splint Invest can help you with alternative assets. Set up your account, explore our funds, and start investing in alternatives.