In the financial market, retail investors like us are called "individual investors" and "ordinary investors", and the corresponding fund managers are called "professional investors" and "institutional investors". It is generally believed that professional investors must have an advantage over individual investors, but in fact: not necessarily. What is the difference between individual investors and professional investors?

1. Advantages of retail investors relative to institutions

The advantages can be summarized in one sentence: retail investors don't need to be far-reaching and difficult, like professional investors.

First of all, it's actually very simple to make money by investing. Just buy indexes of large-scale assets for a long time. Many researchers have used data to prove that almost all major assets have been rising for a long time, so it is a matter of course to make money by investing. For example, we retail investors can generously use investment tools like index funds, ETF funds and real estate trusts (REITs) that look neither advanced nor complicated to achieve our investment goals.

But such a good investment tool is basically not used by professional investors. Why can't it be used? The reason is simple: we don't have to pay someone to do something that anyone can do. If you want to buy an index fund, just open an account and buy it yourself. On the other hand, as professionals, it is not enough to get the average market return. They must prove that they are very smart and can beat the market, so that everyone can willingly hand over the money to them for management.

Secondly, the mission of "keeping away from the near and seeking the far, keeping away from the easy and seeking the difficult" naturally carried by professional investors also creates another obstacle for them, that is, they have to compete not only with the market, but also with their peers. And this kind of behavior is an important source of investment losses.

Peter Lynch wrote such a story in his book that once the presidents of two companies he knew, Smith and Jones, got together to play golf. The pension funds of these two companies are managed in the same bank. As a result, when they chatted, they found that the pension fund account of Smith's company had increased by 4% in recent years, while that of Jones had increased by 28%. Of course, for that segment of the market, these two results are very good. Unexpectedly, Jones called the person in charge of the bank early the next morning with a grim face and asked them why their fund returns were worse than Smith's in the same bank. The answer is also simple: the specific teams that manage the funds on both sides are different, and the stocks and bonds they buy are not exactly the same.

But because of this phone call, in order not to offend customers, the bank can only let its team sell different assets, so that all customers' positions are basically the same, so that no one will have an opinion. In the end, everyone can only buy big companies and blue-chip stocks that everyone knows, because only in this way can we make the most mistakes.

what is the point of this story of Peter Lynch? What he really wants to say is that many professional investors seem to be professional, but in fact they have to do a lot of things that they can't help themselves.

For example, if you are a fund manager, everyone will get a 2% return this year, but you only earn 15%, then you will probably lose your job and no one will want to give you money. So what would you do to be like everyone else? You will be more and more similar to other professional investors. In other words, you buy whatever people buy, and finally you lose the freedom of choice.

So you see, as an individual investor, there are actually some advantages that professionals don't have. We should always remember that it is easy to give up, so as to improve our return on investment. This is like Buffett's famous saying: "In the field of investment, when a person understands how stupid he is, he is no longer stupid."

2. Disadvantages of retail investors relative to institutions

Smart, well-informed and experienced are the characteristics of institutional investors, but they are only appearances. The real gap between ordinary investors and professionals is something that is even more difficult to see.

first, the disadvantages in asset allocation.

In p>217, three fund managers named AQR Capital published an academic paper called Evidence of Trend Investment in a Century. This paper brought a rather counterintuitive conclusion and provided a very profitable operation. Simply put, we pegged the stock market of a country. If the stock market rose in the past month, we would buy more in the next month. If the stock market has fallen in the past month, we will sell short. And then it's gone, that's all.

But in order to reach this conclusion, they have done a lot of complicated calculations. They have calculated 29 kinds of commodities (such as gold, oil and wheat), stock indexes in 11 markets, 15 bond markets and 12 kinds of foreign exchange in 137 years before reaching this conclusion. Interested children's shoes can be found and studied by themselves. In a word, this method is quite effective.

AQR capital management company

I believe you must be thinking when you hear this: if I can do this, won't it make a lot of money?

Then, the key question comes: Can we copy the silly strategy of "chasing up and killing down" adopted by AQR Fund? The answer is that it is much more difficult than you think. The reason is that many seemingly profitable methods are difficult for ordinary investors to do due to various conditions.

For example, in order to spread the risk of a single asset variety in a single country, this investment strategy is actually allocated globally, and it involves not only investing in stocks, but also investing in bonds, commodities, foreign exchange and so on. In addition, due to the different regulatory requirements of different countries, it is difficult for ordinary investors to short a country's market. Also, although the strategy of trend investment is quite simple, it requires us to implement it month after month and year after year. In other words, when the market really starts to fall, you should not hesitate to lighten up your position and sell it, even if it was obviously a loss. For professional hedge funds, they often use programming and algorithms to operate and reduce human interference factors. But for us ordinary investors, this is obviously unrealistic. Not only the above, but also the limitations of ordinary investors.

Then you will say, since they are so powerful, why don't we just buy their fund? Is this ok? Unfortunately, you can't. This will come to the second point.

second, the disadvantage of capital scale.

We know Ray Dalio and the famous Bridgewater he manages. At present, this fund is in charge of more than 15 billion US dollars, and its products have an annual return of 11%~15%, and its performance is extremely stable: the return was positive during the global financial crisis in 28; When the global market was weak in 218, the Pure Alpha fund under Qiaoshui achieved a perfect return of 14.6% after deducting expenses, with excellent results. If you ask me, of course I want to hand over the money to a fund manager of this level.

Ray Dalio

But there is only one problem. Bridgewater is not open to individual investors like us.

On its official website, you can clearly see this sentence: Generally, our requirements for customers are at least $5 billion in investable assets. Moreover, the cost of using our service generally ranges from $5, to $4.75 million per year. So if you want Dario to manage the money, the threshold is still a little high.

There is also a reason behind this: professional fund managers who can stably provide excess returns in the market are extremely rare, so once there really appears a person who can outperform the market all the year round, all the money will flock to his fund. At this time, the fund manager is more inclined to take a large amount of funds instead of accepting money from ordinary investors because of the relationship between supply and demand and the convenience of management.

So, as ordinary investors, let alone the subjective differences between ourselves and professional investors in professional knowledge, industry experience and intelligence level. In many objective aspects, such as the lack of investment tools available, the poor information channels and even the inability to take care of time and energy, the investment methods we can adopt are greatly limited.

3. Normal attitude towards advantages and disadvantages

When many people imagine investing, they have a feeling that what we need is to master some profound knowledge, learn some special skills, or have access to some unknown news and tools ... in order to succeed. But investment is actually very counterintuitive. The simpler we do, the more we admit our limitations and shortcomings, and the more normal we are, the easier it is to succeed.

On the one hand, from the advantage point of view, ordinary investors can "give up hard to find easy" and manage their wealth with the simplest and simple investment tools, which is very cost-effective.

On the other hand, because of our non-professional status, the resources we can access are relatively limited, and it is not worth the cost to spend time studying those strange things.

Therefore, for ordinary individual investors, mastering some simple investment methods and avoiding the most obvious investment mistakes is the right way for us to succeed in investment.