Investing in private funds carries significant risks compared to the S&P 500. Private funds are often illiquid for extended periods, sometimes up to 16 years, necessitating a premium to compensate for this illiquidity. Additionally, the high failure rates associated with certain business models mean that only exceptional investments yield worthwhile returns. To justify investing in private funds, one should expect overall returns in the low twenties, factoring in illiquidity and potential business model issues. Otherwise, investing in the S&P 500, which offers predictable long-term compounding of 7-8%, may be the more favorable option.