Position sizing for an asset you cannot value precisely, the tax treatment nobody mentions until April, a pre-trade checklist, and the four situations where the right answer is to buy nothing.
In this lesson you'll learn
How to size a position in something you cannot value precisely
Where these holdings belong across your accounts, and why
A six-question checklist that maps back to each lesson
The four cases where the right answer is to buy nothing
Why this has to be written down
Private markets are the part of investing where the gap between what you can verify and what you will be told is widest. Six lessons of verification machinery will not help you at the moment it matters — when a company you admire files, the coverage is euphoric, and someone offers you access. What helps then is a decision you already made.
So this lesson produces an artefact: a short written policy, with numbers in it, that you can read in thirty seconds while excited.
Sizing something you cannot value precisely
Ordinary position sizing assumes you can estimate a value and a range. Lesson 3 measured what happens to that assumption here: a median error of -38.2% on the comparable listings, a worst case past ten times, and a sample of 6. Those are not inputs to a precise sizing model; they are a reason not to use one.
Three rules that survive that uncertainty:
A fixed cap on the whole sleeve. Pick a single percentage for all private-market exposure combined — proxies, funds, new listings — and set it before you have a candidate. Small enough that a total loss changes nothing about your plans.
Equal-weight inside the sleeve. Conviction is not informative when the error band is this wide. Sizing by conviction here mostly sizes by how much marketing you have read.
No averaging down on a new listing before its unlock. Buying more into a supply event you could read about in advance is a decision your policy should simply forbid.
If writing a percentage down feels arbitrary, that is the point. An arbitrary limit set calmly beats a reasoned limit set in the middle of a listing.
Which account this belongs in
Holding
Tax character
Where it belongs
Closed-end / interval fund
Distributes realised gains on the manager's schedule; can be large and unpredictable
Tax-advantaged account, where the timing does not cost you
Public proxy stock
Ordinary equity — you control realisation
Either; taxable is fine
Recent listing you intend to hold
Ordinary equity, but high odds of a loss you may want to harvest
Taxable, where a loss is at least worth something
This is a decision you make once. It is also the only part of the whole subject where the benefit is certain rather than probabilistic.
Nothing here is personalised advice, and tax treatment depends on your jurisdiction and circumstances. The structural point — that funds realising gains internally hand you the timing — is general; what it costs you specifically is not.
The six-question checklist
Answer all six in writing before any private-market trade. A single row in the right-hand state is enough to stop.
1Is there a sourced valuation, with a filer and a date?Lesson 2
Proceed: Three or more unrelated funds report it, and I can open the accessions.
Stop: The only number I have is a headline valuation from a press release.
2Do I know the error band on that valuation?Lesson 3
Proceed: The measured median error on completed listings is -38.2% with a worst case beyond ten times, and my thesis survives that.
Stop: My thesis needs the mark to be roughly right.
3How many dollars of the company do I get per $10,000?Lesson 4
Proceed: I have computed it from the disclosure, and the figure justifies the trade on its own.
Stop: I am buying a proxy and hoping the sliver matters.
4If it is a fund, what am I paying versus its own NAV?Lesson 4
Proceed: I know the premium or discount, from a recent tagged NAV, and the expense ratio.
Stop: I have not looked, or the premium cannot be computed and I proceeded anyway.
5If it is a new listing, when does supply arrive?Lesson 6
Proceed: I read the clause, I know the expiry date and the absorb days, and neither sits inside my entry window.
Stop: I assumed 180 days, or I did not check.
6Does this fit inside a position size I wrote down before I got interested?This lesson
Proceed: Yes, and I am prepared for it to go to zero without changing my plan.
Stop: I am sizing it by how confident I feel today.
The four cases for buying nothing
A course about private markets that never concludes "do not buy this" is a sales funnel. Here are the four outcomes this framework produces most often, and each one is a success:
1. No public route exists
3 of the covered companies have no measurable public route. For an unaccredited investor there is no position — and knowing that protects you from the products that claim otherwise.
2. The exposure is trivial
When the only routes deliver a few hundred dollars of the company per $10,000 invested, you are choosing the proxy's business, not the private company's. Own it on its own merits or not at all.
3. The price relative to NAV is not worth it
A concentrated fund at a wide premium can be a worse deal than no exposure. The premium is measurable before you trade — which means paying it is a choice.
4. Supply is coming and waiting is free
If a large unlock sits between now and your intended entry, and nothing forces you to act today, the calendar is on your side. This is the most frequently ignored free option in the entire subject.
The measurable output of this course is usually fewer positions, held smaller, entered later. That is what it looks like when verification actually changes behaviour.
Where to go next
The four data surfaces the lessons taught from are all free and all update when the filings do:
If the valuation side of this course was the part you want more of, the natural follow-on is How to Value a Stock — the same discipline applied where the financial statements are public.
Quick Knowledge Check
3 questions · test what you've just learned
1
Your policy says private-market exposure is capped at 3% of your portfolio. A company you have followed for two years files its S-1 and the pop looks likely to be large. What does the policy do?
2
Which of these is a legitimate reason to buy nothing at all?
3
You hold a fund at a 20% discount to NAV inside a taxable account, and it distributes large realised gains each December. What is the policy-level fix?
✓ Key takeaways from Lesson 7
Size private-market exposure as a fixed, small percentage decided before you find something exciting — and treat every position as capable of going to zero.
Funds that realise gains internally belong in tax-advantaged accounts. That is a one-time policy decision worth more than any timing effort.
The checklist is the course: sourced valuation, measured error band, real exposure per dollar, price versus NAV, supply calendar, predetermined size.
Buying nothing is a legitimate and frequent outcome. Most covered companies do not produce a sensible trade for an ordinary investor.
Everything the course teaches from, in one place
Marks, accuracy, lock-ups and exposure — all free, all sourced to filings, all updated when the underlying data changes.
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