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Understanding Private and Public Markets: An In-Depth Comparison for Investor

Edited By Sunita Arnold, Jul 19, 2023

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Private and Public Markets Unveiled

As an investor, understanding the key differences between private and public markets is crucial for navigating the dynamic landscape of investments. Serving as the primary platforms for companies to raise capital and investors to grow their wealth, these markets significantly differ in terms of accessibility, liquidity, risk, and potential returns. This article will help demystify the intricate elements of private and public markets. Whether you’re a daring treasure hunter or a cautious sailor, there’s an ocean of possibilities waiting for you. So, let’s weigh anchor and embark on this illuminating journey through the thrilling seas of investment

Your Gateway to Investing: Understanding Accessibility

Stepping into the investment  domain is akin to entering a grand arena, where fortunes are made and opportunities abound. But first, one must understand the gatekeepers and barriers that separate the private and public markets. Let’s uncover the keys to unlocking these gates.

The High Table: Unlocking Private Markets

In the realm of private markets, exclusivity is the watchword. Here, companies are closely held, and investments are not available to the general public. The entry into this high table demands substantial capital and often requires investors to meet certain accreditation criteria .

Investment Thresholds and Accreditation Simplified

To cross the threshold into the private markets, a significant initial investment is required – far more than what you would need in public markets . Additionally, in many countries, including the United States, individual investors must also meet specific accreditation standards. This means they must meet specific net worth or income criteria. Accreditation acts as a safeguard, ensuring that only those with significant financial resources, and ostensibly a higher ability to shoulder risks, participate in the private market. Despite the potential risks, the allure of unique opportunities and potentially higher returns make private markets an attractive prospect for some.

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The Market Bazaar: Tapping into Public Markets

Conversely, the public markets are akin to a bustling bazaar, open to one and all. These markets are where companies’ stocks, bonds, and other securities are traded openly.

Unpacking the ease of entry and Diverse Opportunities

Public markets are characterized by their ease of entry. With a relatively small amount of capital, almost anyone can open a brokerage account and start investing in a multitude of securities. The lower barrier to entry and a wide variety of investment options, from stocks and bonds to ETFs and mutual funds, make public markets particularly attractive to retail investors. Public markets also offer a transparent and regulated environment, which can be especially appealing to those who are cautious and prefer to have a clearer view of their investment’s performance.

The Tides of Investment – Liquidity and Time Horizons

As we sail further into the investment waters, the concepts of liquidity and investment horizons emerge as crucial navigational tools. Understanding these tides can help investors steer their ships in the direction of their financial goals.

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Riding the Waves: Liquidity in Public Markets

Public markets resemble the vast, bustling ocean, brimming with constant activity. Here, the ‘waves’ symbolize liquidity — the ability to easily convert assets into cash without causing a major shift in their price.

Trading Flexibility and Market Depth Explained

In public markets,  high liquidity allows flexible trading . With just a few clicks, you can buy or sell stocks, bonds, or other securities. This fluidity allows quick responses to market fluctuations. This fluidity allows quick responses to market fluctuations. However, remember that high liquidity can sometimes lead to high volatility, with prices capable of dramatic shifts within a short timeframe. Market depth, which refers to the market’s ability to handle large trade volumes without affecting the asset’s price, plays a significant role here. Deeper markets tend to be more stable, while shallower markets may witness more pronounced price movements.

Sailing Calm Waters: The Long Game of Private Markets

Contrasting the busy ocean of public markets, private markets resemble serene, secluded lakes. Here, the focus is on long-term investments and less on immediate liquidity.

The Patience Premium and Limited Liquidity

In private markets, assets are not as  readily traded as they are in public markets. Often, investors must commit their capital for extended periods – sometimes years. This illiquidity is a double-edged sword. On one side, it may result in higher returns, known as the illiquidity premium. This premium compensates investors for tying up their money. On the other side, it means that your investment is less flexible and might not be easily converted to cash in times of need. However, for those with  a longer investment horizon and the appetite for potentially higher rewards, the calm waters of private markets could be a preferred destination.

The Treasures and Traps – Risks and Returns

As we near the treasure island, understanding the risks and returns is vital to ensure that the riches don’t turn into traps

The Bold and the Cautious: Risk Profiles Compared

Just like deciphering a pirate’s treasure map, investments in both private and public markets come with a fair share of risks and rewards.

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Quick look at risks in private and public markets

Private markets, despite their allure of potentially higher returns, carry increased risks due to limited regulatory oversight, emphasizing the importance of thorough due diligence. Meanwhile, public markets, though regulated, aren’t devoid of risks either. Factors like market volatility and macroeconomic shifts can significantly influence your investments.  It is essential for investors to assess their risk tolerance and choose investments accordingly.

Panning for Gold: Potential Returns and Influence

What’s an adventure without the prospect of treasure? The potential returns are what entice investors to embark on this investment journey.

Returns and Investor Influence: A Quick Snapshot

Private markets can offer higher potential returns, but with a long-term horizon. Moreover, investors often wield  more influence over  business decisions. Conversely , public markets offer a greater diversity of investment options  and the liquidity, to  realize returns more quickly, although they might be lower on average.

Comparison Between Private and Public Markets: Conclusion

With a deeper understanding of the intricacies between private and public markets, you, as and investor, are now better equipped to chart your course in the dynamic seas of investment.. Whether you prefer the exclusive shores of private markets or the bustling bazaars of public markets, understanding their accessibility, liquidity, risks, and returns is vital in your journey . So, set your compass, hoist the sails, and may your investment voyage be prosperous and fulfilling.

This material, provided by Linqto, is for informational purposes only and is not intended as investment advice or any form of professional guidance. Before making any investment decision, especially in the dynamic field of private markets, it is recommended that you seek advice from professional advisors. The information contained herein does not imply endorsement of any third parties or investment opportunities mentioned. Our market views and investment insights are subject to change and may not always reflect the most current developments. No assumption should be made regarding the profitability of any securities, sectors, or markets discussed. Past performance is not indicative of future results, and investing in private markets involves unique risks, including the potential for loss. Historical and hypothetical performance figures are provided to illustrate possible market behaviors and should not be relied upon as predictions of future performance.


Sunita Arnold

Sunita Arnold

As Director of Content Strategy at Linqto, Sunita deftly merges creative and strategic planning. Guiding a talented team, she aligns content with marketing objectives to deliver compelling, brand-consistent materials. Her diverse 15+ year career spans fintech, healthcare, and public relations, with highlights including managing investor relations for an alternate investment platform, steering business development in a leading PR firm's sports and entertainment sectors, and overseeing operations for a wealth management data service. Her past achievements include significantly contributing to the growth and efficiency of a top global fund administrator. Keeping pace with industry trends, Sunita applies her strategic acumen and market insight to advance Linqto's content strategy.