Introduction to Private Equity

Risks of private equities

Private equities come with their own substantial risks. Illiquidity tops the list—once you're in, you're typically locked in for years. There's no public market where you can sell your stake if you change your mind or need the cash. Your money is essentially tied up until there's an "exit event" like an acquisition or IPO, which might never happen.

Information asymmetry is another major concern. Unlike public companies with standardized disclosures, private companies can be selective about what they share with investors. You're often making decisions with limited data, and it's not uncommon to discover unpleasant surprises after you've already committed your capital.

The failure rate is also much higher in private markets, especially with early-stage companies. The sobering reality is that most startups don't make it, and even established private companies can implode without the scrutiny that comes with being public. When you're investing that first $10k, you need to be honest with yourself about whether you can stomach losing a significant portion—or potentially all—of your investment in exchange for the possibility of those headline-making returns that everyone loves to talk about.

How does Public Equity compare?