How can retail investors beat institutions?

I went back to a previous article I wrote for 2017 and promised to post it on the web. Now I'm sharing it here in 鄭丁港 some of my own thinking from the last few years in the business.

Years ago I read Lynch's book "Beating Wall Street", which for the first time made me understand that retail investors actually have the existence of some corporate advantages relative to institutions. It was a shock to me. Because at that time it was always possible to think that retail investors had too many disadvantages relative to institutions, while the advantages were almost always absent. Later within a long and important stage, I as a research a retail investor and have institutional services work life experience in investment activities practice teaching exploration learning proces鄭丁港 some questions thinking.

I think most books and articles have a single understanding of the pros and cons of retail investors. There is only one understanding of the strengths and weaknesses of the organization. If based on these single ideas, it is easy to go astray. Scientific training is predicated on scientific thinking. So I

do some deeper thinking. Just as it is possible for a small rice rifle to defeat an airplane or cannon, individuals need to think differently and be trained scientifically to fight as differently as possible.

I. Advantages and disadvantages of retail investors and institutions

(A) Retailers

Knowing ourselves and our opponents in any business competition 鄭丁港. It is called self-knowledge and knowing others. It is important to delineate the strengths and weaknesses of students themselves and other parties. As a retailer possible advantages I mainly divide from the development of strategic and tactical two national levels. Strategic management level.

1. a good knowledge base, network and possible cognitive advantages in a specific industry or small area. Some retail investors may have a good knowledge of their industry and business, or at least a deep understanding of the conditions and resources.

2. There is potential for talent. For example, some people do have a talent for trading, or a grasp of trends. But it takes long practice and samples to prove it.

At the tactical level, the advantages of retail traders are.

1. low time management costs; 2. no communication business costs; 3. little capital operation can be flexible. (These points under human nature have their own may become disadvantages)

(B) institutions

The disadvantages of retail investors are actually the advantages of institutions, mainly including.

1. three-dimensional knowledge coverage of multiple industries. 2. faster and higher quality information. 3. more and better tools and research support. Quite simply, organizations have more talent, faster and better information, closer company relationships, more data and better tools. You see quantitative high-frequency algorithms, a powerful tool for harvesting retail investors.

The disadvantages of the organization are really quite simple. There are three main parts, one part comes from performance reviews. One part comes from organizational structure. One part comes from human flaws.

Performance for assessment, I think we all know very well. The problem is that an organization that everyone often reads has ranking pressure, is more interested in short-term development, and can not tolerate the cost of time management.

Organizational structure, hardly anyone talks about it, but it is important. Organizational structure guides investment decisions through four links: researcher-fund manager-investment committee-fund manager. We all know that as long as there are many links, decisions become complex. Investment decisions may not be 100% in line with the fund manager's ideas. At the extreme, even the fund manager's decision is rejected. This is the first disadvantage.

The second disadvantage is that even if we simplify the process and ignore it, we can't execute it 100% of the time. There is also a big problem with direct observation of researchers, fund managers. Communication costs are high. Most fund managers are actually familiar with only a handful of sectors, and researchers in other sectors have to rely on their own awareness, so to what extent will he trust the researchers? When they are tested by falling stock prices, do they panic and sell off their stocks? Is it too much to bear? These are all very realistic situations. If the researcher's direct decision score is 80, after this process, his direct decision score is likely to be only 60. Not to mention, the company may also suffer from large corporate disease that makes fund managers dance around. Believe it or not, you see one or two examples of this every year.

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