Private Equity & Alternative Investments 101: Understanding Opportunities Beyond Traditional Markets
June 26, 2026
This month, Nora was joined by Nic and Shaun for a webinar on investing beyond traditional markets, with focus on private equity. They explained how private equity works, the ways to access it, and the major trade-offs, including illiquidity, valuation uncertainty, high fees, leverage, tax complexity, and limited transparency. The session closed with practical questions to ask before committing capital thoughtfully.
Frequently Asked Questions:
Alternative investments are investments outside of traditional publicly traded stocks, bonds, and cash. This can include private equity, private real estate, hedge funds, structured products, annuities, precious metals, crypto, or concentrated stock positions. As Nic noted, “alternative” does not automatically mean “better.” These investments may play a role in certain situations, but they also come with unique risks and trade-offs.
Private equity refers to money invested in companies that are not publicly traded. These companies can range from small private businesses to large, well-known companies that have not entered the public markets. Private equity can include venture capital, growth companies, buyouts, and special situations, such as distressed companies or restructurings.
Many companies are staying private longer than they used to. The webinar noted that a large percentage of U.S. companies with at least $100 million in revenue are privately held. This has created more interest in private markets, especially as investors hear about companies before they go public. However, access to private companies does not guarantee better results, and the risks can be very different from public markets.
Private equity often comes with limited liquidity, valuation uncertainty, higher fees, less transparency, and potential tax complexity. Unlike publicly traded investments, private investments may be difficult or impossible to sell when you want cash. Values may also be based on periodic estimates rather than daily market pricing. These trade-offs should be carefully reviewed before committing capital.
Before investing, ask how liquid the investment is, when you may be able to access your money, how the investment is valued, what fees apply, whether leverage is used, and how transparent the reporting will be. Shaun also emphasized a simple but important question: if the opportunity is so attractive, why is the person raising money from individual investors instead of a bank or institutional lender? Private investments should be evaluated through the lens of your overall financial plan, risk tolerance, and long-term goals.
Private Equity Sounds Exciting. Here’s What Investors Should Know First
If you read financial headlines, you have likely seen stories about massive initial public offerings or startup companies raising billions of dollars. These events often generate excitement and curiosity about how to get involved.
You might wonder if you should be investing in these private companies before they hit the public market. While the idea sounds appealing, the world of private equity is complex and requires careful consideration. Today, we are exploring the basics of alternative investments and the realities behind the hype.
Defining the Universe of Alternative Investments
When we talk about traditional investing, we usually mean building a portfolio of publicly traded stocks, bonds, and cash. These are companies and assets that file regular reports with regulatory bodies and can be traded on open exchanges daily.
Alternative investments introduce a different slice of the pie. This broad umbrella includes physical real estate, hedge funds, precious metals, and private assets. Because these assets operate outside of traditional public markets, they do not have the same reporting requirements or daily liquidity.
The Shift Toward Private Companies
Over the last couple of decades, the number of publicly traded companies has decreased. Many new, rapidly growing companies are choosing to remain privately held for much longer. Private equity firms often step in to provide funding, allowing these companies to expand without facing the rigorous quarterly reporting requirements of the public market.
Because so many companies are staying private, investors often look to alternative investments to access that potential growth. However, accessing this market comes with distinct trade-offs.
What Exactly is Private Equity?
Private equity is a broad term for investing in non-public companies. While there is no single standardized definition, it generally falls into four main segments:
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Venture Capital: Funding for early-stage companies or startups. These carry high potential for volatility and a significant rate of business failure.
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Growth Equity: Capital provided to relatively mature companies that are looking to scale or expand operations.
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Buyouts: Investments in established, cash-flow-positive companies. Often, a firm will buy a company, attempt to improve its profitability, and aim to sell it later.
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Special Situations: Investments in companies facing unique challenges, such as restructuring or bankruptcy.
Weighing the Trade-Offs and Risks
It is easy to get caught up in the excitement of a new venture, but it is vital to understand the risks involved with alternative investments.
The Hurdle of Illiquidity
Traditional stocks can be sold during normal market hours. Private equity is usually a long-term commitment. In many cases, your capital is locked up for years. If you experience a financial emergency, you generally cannot access those funds easily.
Valuation Uncertainty
Public markets determine a stock’s price every second of the trading day. Private companies are valued differently. They rely on periodic audits and estimations, meaning you do not always have a real-time picture of what your investment is actually worth.
Elevated Fees and Tax Complexity
Private investments often come with higher fees, sometimes including performance fees that take a percentage of the profits. Additionally, the tax reporting for private partnerships is notoriously complex and can delay your annual tax filings.
The Core and Satellite Approach
Alternative investments do not replace a traditional portfolio. Instead, they are sometimes used as a complementary piece of a larger puzzle.
Many financial professionals discuss a “core and satellite” approach. In this framework, the vast majority of a portfolio remains in core, liquid investments like public stocks and bonds. A much smaller satellite portion might be dedicated to alternative investments, depending on the investor’s specific risk tolerance and time horizon.
Next Steps for Your Financial Journey
Navigating tax, legal, investment, and estate planning strategies can be complex, and outcomes depend heavily on individual circumstances. What makes sense for a large institutional endowment or a highly aggressive investor might not be appropriate for your family.
Before acting on a tip from a friend or committing to a private investment, consider taking a step back to review your unique goals. We encourage you to speak with a qualified financial professional to discuss strategies that align with your specific needs.
Schedule a complimentary review with our team and we can walk through your options together. Connect with us at https://balancewealth.com/contact/.
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This material is purely intended to be general and educational in nature, and should not be construed as specifically-tailored investment, financial planning, tax, legal, or other professional advice. Information and data contained herein is as-of the date of publication, and may be subject to change in the future without notice. Any investment performance referenced is purely past performance, which is no guarantee of any future performance. Nothing contained herein should be construed as an offer to sell, a solicitation of an offer to buy, or a recommendation of any security or other financial product or investment strategy. All investment, tax, and financial planning strategies involve risk that you should be prepared to bear. You are highly encouraged to consult with professionals of your choosing before taking any action based on this material.