The Biggest Edge In Investing

When speaking with investors about public Vs private company investing a lot of topics arise, valuation, liquidity, disclosure, various control and capital structure differences etc.

There is however one critical “side difference” many are overlooking, private companies inherent feature of constrained liquidity enables investors to protect themselves against their “emotional self.”

By not being able to see constant quotes on a daily basis when owning a private enterprise, investors are unable to click on a mouse at a “moment of weakness” and exit their position prematurely.

No matter how good a business is, one still needs to hang on for years in order to truly enjoy the magic of compounding growth. In reality, few can sit tight and do nothing while seeing their stock price fluctuates daily, moving from $10 a share, to 13 to 15 to 25 to 50 to 150, after all even insiders usually can not hang on that long.

Investing in private companies or long term lock-up situations protects investors from their emotions, it is a tremendous and underrated edge as it forces management and shareholders to sit tight and focus on growing a long term business.