Here’s the Truth about Public vs. Private Equity, What You Need to Know for Your Future

Today, we’re diving into a powerful question: What’s the difference between public investments—like stocks, bonds, mutual funds, and ETFs—and private equity?

With recent talks about private equity possibly being allowed inside retirement accounts like 401(k)s and even IRAs, now is the perfect time to understand the differences. Especially if you’re going through a layoff, this may be your chance to re-evaluate your portfolio and design a balance that works for your long-term goals.

By the end of this episode, you’ll walk away knowing:

• The core differences between public and private investing.
• The advantages and drawbacks of each.
• How to think about blending them in your retirement strategy.
• And why now, after a layoff or big life change, might be the perfect time to rebalance your financial life.

Grab your notebook, maybe some coffee, because we’re going deep today.

 

Public Investments Explained

Let’s start with the basics—public investments.

Public markets are where most of us begin our investing journey. These are investments you can buy and sell through exchanges or brokers:

• Stocks – Ownership in a company. When the company grows, your stock grows.
• Bonds – Debt investments. You lend money to a government or corporation and they pay you interest.
• Mutual Funds – Professionally managed pools of stocks and bonds.
• ETFs – Exchange-Traded Funds, similar to mutual funds but traded like a stock with lower costs.

Advantages of public investments:

• Liquidity: You can sell quickly, often within seconds.
• Transparency: Prices update daily, and disclosures are required.
• Accessibility: Almost anyone with a brokerage account can participate.
• Diversification: Through funds and ETFs, you can own hundreds of companies with a single purchase.

Drawbacks of public investments:

• Volatility: Markets swing daily, sometimes dramatically.
• Herd mentality: Prices can be influenced by emotions, fear, and speculation.
• Lower potential for “outsized” returns compared to early-stage private deals.

Public markets are like an open-air farmer’s market—you can see what’s available, compare prices, and walk away at any time.

 

What is Private Equity?

Now let’s talk about private equity.

Private equity refers to investing in companies that are not listed on public stock exchanges. These could be startups, family-owned businesses, or even large established firms that are taken private by private equity funds.

Examples include:

• Venture capital funding for early-stage companies.
• Growth equity for scaling businesses.
• Buyouts of mature companies to restructure and resell later.

Advantages of private equity:

• Potential for much higher returns, especially if you invest early in the right company.
• Less day-to-day price volatility—you’re not watching a ticker every second.
• Active involvement—private equity firms often help manage and improve the business.

Drawbacks of private equity:

• Illiquidity: Your money could be tied up for years before you see returns.
• High minimums: Many funds require hundreds of thousands or even millions to participate, though this may change with retirement account access.
• Less transparency: Private companies don’t have the same reporting requirements.
• Higher fees: Management and performance fees are often much higher than public market funds.

Think of private equity like being a part-owner of a vineyard. You won’t see a harvest every day or even every year, but when the wine is finally bottled and sold, the payoff can be substantial.

 

Public vs. Private Equity in Your Portfolio (5 minutes)

So how do these compare?

• Liquidity vs. Lockup: Public investments let you in and out daily. Private equity locks your money for years.
• Risk vs. Return: Public is relatively lower risk but also capped in potential. Private equity is higher risk, but potential for outsized reward.
• Accessibility: Public markets are open to all. Private equity has been limited to wealthy investors and institutions—but that’s changing.
• Transparency: Public markets are regulated and audited. Private markets are less transparent, requiring more trust in managers.

With regulators considering allowing private equity in 401(k)s and IRAs, everyday investors may soon gain access to opportunities once reserved for the wealthy. But with access comes responsibility—you must understand the risks.

 

The Layoff Opportunity – Rebalancing Your Future (5 minutes)

If you’ve recently gone through a layoff, you might be looking at your 401(k), IRA, or even a severance package and wondering: what do I do next?

This is the perfect time to:

• Review your investment mix.
• Decide if you’re too heavily weighted in one area.
• Explore whether private equity, when available, might complement your public investments.

For example:

• You might keep 70–80% in public investments for liquidity and steady growth.
• The remaining 20–30% could go into private equity for long-term potential, if your time horizon allows.

This moment of transition—though stressful—can actually give you the clarity to build a portfolio that’s balanced, diversified, and tailored to your risk tolerance.

 

Setting Up the Perfect Balance (5 minutes)

How do you strike the right balance between public and private?

Here are some guiding principles:

1. Start with your goals – Retirement in 20 years? Building wealth for your kids? Your horizon matters.
2. Ensure an emergency fund – Never tie up money you might need in the short term.
3. Think about liquidity – Keep enough in public markets for flexibility.
4. Diversify across asset classes – Stocks, bonds, ETFs, and perhaps a portion in private equity when available.
5. Seek professional advice – A financial advisor or fiduciary can help assess your unique situation.

Remember, balance doesn’t mean 50/50. Balance means aligning your portfolio with your needs, time horizon, and comfort with risk.

 

Public investments and private equity serve different purposes. Public markets give you liquidity, transparency, and accessibility. Private equity offers the potential for higher returns, but with higher risk, less transparency, and long lock-up periods.

If you’re facing a layoff, don’t see it as an end—see it as a chance to reimagine your financial future. Use this moment to reset, rethink, and design a portfolio that truly reflects your goals.

 

Tomorrow, I’m going to show you simple strategies to build a side hack into an income you can’t ever be fired from. Imagine, it’s your 5th week of vacation and you’re not worried about going back to the office because you know your income is on automatic.

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I’m Doug Reed, and this has been Life By Design 360. If today’s conversation helped clarify your thinking about investments, make sure to subscribe, share this with a friend, and leave a review.

And remember: your future isn’t just something that happens—it’s something you design.