Depends what it does.
Lets say you run a Reddit/Twitter/YouTube proxy. Yeah, the services ultimately still get your server's IP, but you will just appear as coming from some datacenter somewhere, so while they can know it's your traffic, they can't track you on the client side frontend and see that you were at home (and where your home is), then you went on mobile data and then ended on a guest WiFi, then at some corporate place. The server is obfuscating all of that. And you control the server, so your server isn't tracking anything.
The key to those services being more private is actually to have more people using them. Lets say now you have 10 people using your Invidious instance. It'll fudge your watch pattern a fair bit, but also any watched video could be from any of the 10 users. If they don't detect that, they've made a completely bogus profile that's the combination of you and your 10 users.
You can always add an extra layer and make it go through a VPN or Tor, but if you care that much you should already always be on a VPN anyway. But it does have the convenience that you can use it privately even without a VPN.
A concrete example. I run my own Lemmy server. It's extremely public but yet, I find it more private that Reddit would. By having my own server, all of my client-side actions are between me and my server. Reddit on the other hand can absolutely log and see every interaction I have with their site, especially now that they've killed third-party apps. It knows every thread I open, it can track a lot of my attention. It knows if I'm skimming through comments or actually reading, everything. In contract, the fediverse doesn't know what I actually read: my server collects everything regardless. On the other hand, all my data including votes is totally public, so I gain privacy in a way but lose some the other way.
Privacy is a tradeoff. Sometimes you're willing to give away some information to protect other.
For selfhosting as a whole, sure some things are just frontends and don't give you much like an Invidious instance, but others can be really good. NextCloud for example, I know my files are entirely in my control and get a similar experience to using Google Drive: I can browse my stuff from anywhere and access my files. I have my own email, so nobody can look at my emails and give me ads based on what newsletter I get.
It doesn't have to be perfect, if it's an improvement and gets you into selfhosting more stuff down the line, it's worth it.