Five reasons why you have the upper hand over professional investors

Fsp Invest, 29 Jan. 2014

Tags: retail investor, professional investor, professional trader, stockbroker, stock broker, investor, investment, advantages of investing, advantage, fund managers,



You might think as a retail investor the odds are stacked against you and professional traders and stockbrokers are in the best place to make profits. But this isn’t the case. As a retail investor, you actually have the upper hand. Read on to uncover five reasons why you have the upper hand…



The market place is full of professional investors, who despite all their apparent advantages, have some massive handicaps when it comes to investing, John Stepek in Money Week explains…

But that gives you five big advantages over the market. And these are enough to tilt the balance in your favour when it counts.

Advantage #1: Your job isn’t at stake

When you invest your money, the only thing you have to worry about is not losing it. That’s pressure enough. But imagine if your job depended on your investment performance too.

Thankfully, you don’t have this kind of pressure. Fund managers do. That’s your first advantage.

Advantage #2: You don’t have to worry about selling yourself

By and large, financial institutions don’t make money by beating the market. They make money by sucking in as much of their clients’ cash as they can, then siphoning off as much as they can get away with.

The return on a fund, for example, only really matters in so much as the fund management company can use it as a marketing tool to attract more money to the fund. Hence, the pressure on fund managers to keep ahead of their rivals.

You don’t have to worry about any of this. All you care about is which investments will give you the best return.

Advantage #3: No one tells you what you can and can’t invest in

Most fund managers have all manner of restrictions on what they can invest in. If they say they invest in blue chips, that’s what they have to do, even if the manager would rather whip all his own money out of the market and stick it in gold.

You have no such restrictions. And you don’t have to invest at all if you don’t want to. So you can sit out the rough spells, rather than simply hoping that your fund will fall by less than the next guy’s.

Advantage #4: You’re more agile

A complaint small-cap fund managers often make is that they can’t invest in the companies they really like, because they can’t get hold of enough stock without moving the share price higher.

Unless you are investing millions of rands, you won’t have this problem. So you can profit from the opportunities that they are too unwieldy to take advantage of.

Advantage #5: No one cares about your money more than you do

Finally, when you give your money to a fund manager, you are just one client among many. And you’re unlikely to be the most important one. R100,000 is a lot of money if it’s your nest egg. But it’s just a tiny chunk of a R1 billion fund.

So who’s going to look after that R100,000 best? A guy who sees it as a fraction of a daily fluctuation in his assets under management? Or you, the one who knows just how much blood, sweat and tears went into generating that raw capital?

So there you have it, five reasons why you have the upper hand over professional investors.


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