As we speak, President Trump continues to implement (and threaten additional) tariffs on imports to America. Of note, Australia is included in the 25% tariff on steel and aluminium imports. Trump is trying to reduce the need to import goods from other countries and increase overall manufacturing conducted on ‘home soil.’ This has created brand new uncertainty across public markets (something we have all become accustomed to in recent years!), resulting in significant volatility and a general market selloff.

When building an investment portfolio, understanding the distinction between public and private assets is crucial. While both types of investments carry inherent volatility, the way that volatility is experienced differs significantly. This difference can shape an investor’s perception of risk and overall comfort with their portfolio.

Public vs. Private Assets

Public assets, such as listed shares, hybrids and certain types of bonds, are traded on exchanges, making their prices readily available. This transparency means that investors see price fluctuations in real-time, sometimes leading to heightened emotional reactions to short-term market swings. The liquidity of public assets allows for quick buying and selling, but it also means that prices can be more reactive to economic events, investor sentiment, and global news.

Private assets, on the other hand, include investments like private equity, property, and infrastructure, and private lending/credit. These assets are not typically traded on public markets, and their valuations are often assessed periodically rather than daily. Because pricing updates occur less frequently, the volatility of private assets appears lower compared to public assets, even if their underlying economic risks are similar. This can lead to a smoother investment experience, reducing the psychological stress that comes with watching daily market fluctuations.

Managing Volatility for a More Comfortable Investment Experience

Volatility is an unavoidable aspect of investing, but how it is experienced can make a significant difference. Public assets reflect immediate market sentiment, making their volatility more apparent. This can lead to great opportunities to buy good quality assets at a low price but can also make investors feel uneasy.

Private assets, while not immune to economic downturns, offer a less turbulent experience because their values are reassessed less frequently. This can create a sense of stability for investors, even if the underlying risks remain.

A well-balanced portfolio that incorporates both public and private assets can help investors navigate market fluctuations while maintaining a long-term perspective. By understanding the nuances of volatility in different asset classes, investors can make informed decisions that align with their financial goals.

At Hewison Private Wealth, we always work to understand client needs and goals to ensure we are designing a portfolio that meets their individual requirements – including what proportion of their portfolio is exposed to public and private assets.