The advantages we have over Wall Street

Retail investors such as you and I cannot compete with the big fund managers when it comes to speed or scale.

But there are other factors to consider when making money in the financial markets.

Here are some things to keep in mind that should give us an advantage over the institutional players. 🙂

Time: Large fund managers need constant liquidity because clients may want to pull their money out. They can’t lose too much money too quickly. But as a long term investor you have the advantage of time on your side. You don’t care if the stock market falls 20% next year because you don’t need the money until you retire decades later. This allows you to capitalize on longer term trades that Wall St. simply can’t afford to make.

Less regulation: Large fund managers must follow onerous regulatory requirements to demonstrate proper risk management. But individual investors don’t have capital requirements and can concentrate all the money into a handful of investments, or use leverage which many large money managers aren’t allowed to use. This gives retail investors more flexibility and make the most from changing market conditions.

Smaller transactions: When big players buy or sell shares they have to do it over the course of days or even weeks because their volumes are so large they can move the price of the markets against their position. This is why timing the market, should it be done, favours the individual investor because we can get in or out relatively quickly without moving the markets.

Random Useless Fact

Bernard Arnault is currently worth $202 billion, making him and his family the richest in the world.