The Federal Reserve is about to cut interest rates, and the market is currently betting on a 50 basis point cut, which has reached 61%. How much will it cut? It will soon be revealed. At this time, let us help you understand the 14 weaknesses of retail investors. As long as you overcome these weaknesses, you can outperform institutions.
David Dast, founder of Morgan Stanley Investment Group, clearly stated in his famous work "The Art of Asset Allocation" that it is not accurate to think that institutions will definitely outperform retail investors. Retail investors have their own advantages, including the following points:
1. Institutional investors essentially manage funds, which is equivalent to helping others manage money, while individual investors manage their own money. The two are not playing the same game at all. Individuals do not need to interfere with investment decisions for factors such as the team, employees, market size of competitors, fund rankings, and satisfaction of LP investors.
2. Individual investors have no time limit for investment, while institutional investors who help others manage money must be affected by a fixed period of performance to influence your decision. Because investors cannot accept losses on the books, whether quarterly or annually, once a loss occurs, investors will withdraw from the fund, and fund managers will be cruelly swept out of the market. Individual investors do not need to be affected by this and can hold core assets that can cross the bull-bear cycle.
3. Individual investors can make better independent judgments, while the judgments of institutional investors must be influenced by the entire industry and circle. It is very difficult to succeed as a rebellious institutional investor. Just like the prototype of the movie "The Big Short" is Michael Burry. When he insisted on shorting the housing market, the returns of his fund kept shrinking. Investors came to say that he was crazy and put pressure on him to change his decision or withdraw from his fund.
4. When individual investors want to make changes, they can change, overcome some of their own defects in human nature, some deep-rooted problems and impulses, and thus change from psychological changes to behavioral changes, and finally achieve their goals, but institutions are often too cumbersome and difficult to turn around, far less flexible than individuals.
