Deciding Whether Private Equity or the Stock Market Is Right for You

There are many different vehicles by which you can spend your investment capital.

Perhaps the two most common methods that you can utilize are buying stock and private equity investing. In both cases, you are essentially gaining partial ownership of the company in question. But the similarities between the two don’t go much further than that. The main difference, which can be understood right from the name, is that private equity is owned by a company or business that does not open itself up to public investment. By contrast, anyone can invest in a company that is found on the stock market, which is why they are said to be publicly owned.

When it comes to choosing between the two, you might have to decide based on what kinds of goals you have for your investment dollar. For the most part, private equity investments tend to be realized over a longer period of time. Stocks can certainly have a buy and hold aspect to them as well, but they are much more flexible investments and allow you to try and time the stock market in order to make a quick profit. In either case, they are major risks involved, risks which you as an investor can mitigate with diligent inspection of the public or private companies in question.

You can also choose to invest in other financial instruments, such as the foreign exchange market, in which case understanding the ins and outs of the Forex S&R is critical. When choosing between private and public investment, however, there are certain characteristics of each which you may find to your liking.

Getting to Know You

Most people who are private equity investors get involved by simply connecting to small companies near them, often owned by people they either know or can get to know. This is a chief benefit for people who choose the private method of investing, in that they don’t have to get involved with large companies that are largely faceless. You can see and hear first-hand where your investment dollar will go from those in charge of the private company.

Indicator in Play

When you invest in a company via private equity, you can do your homework, in the beginning, to see how the company in question might stand in terms of its fundamentals. But the stock market offers much more in the way of statistical indicators. For those who are numerically inclined, public investing might offer more of a comfort level.

Volatility Concerns

This is a tricky area because not all privately-owned companies are assured to be free of rises and drops in value. Yet because those companies aren’t concerned about a stock price, there is generally less upheaval in terms of your investment with them. Although there are certainly safe plays among the stock market companies, you should be prepared for more volatility when you invest in that arena.
As stated above, public or private, will reap the rewards. That said, it’s likely that you might feel much more at ease with one method over the other.

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