The Retail Edge
Retail investors and institutional investors are two different groups of investors who have different characteristics and investment goals. Institutional investors are large organizations, such as pension funds, mutual funds, and insurance companies, that invest large sums of money in financial markets. On the other hand, retail investors are individual investors who invest their own money in financial markets. While institutional investors have access to more resources and expertise, savvy retail investors can deliver better investment performance than institutional investors while avoiding significant price slippage.
One advantage that savvy retail investors have is the ability to focus on specific investments. Institutional investors typically have a broad mandate to invest across multiple asset classes and industries. This can result in a lack of focus and depth of knowledge in specific investments. In contrast, savvy retail investors often have a deeper understanding of specific investments and can dedicate more time and resources to researching and analyzing these investments.
Another advantage that savvy retail investors have is the ability to act quickly on investment opportunities. Institutional investors often have a cumbersome decision-making process that involves multiple layers of management and approval. This can result in missed investment opportunities or delayed execution of investment strategies. Savvy retail investors can act more quickly and take advantage of investment opportunities as they arise.
Furthermore, savvy retail investors can avoid significant price slippage by carefully managing their trades. Price slippage occurs when the actual execution price of a trade differs from the expected price. Institutional investors often trade large volumes of shares, which can lead to significant price slippage due to the impact of their trades on the market. Savvy retail investors, on the other hand, can manage their trades by breaking them up into smaller orders, using limit orders, and avoiding trading during periods of high volatility.
Additionally, savvy retail investors can achieve better investment performance by avoiding the herd mentality that often plagues institutional investors. Institutional investors tend to follow the crowd and invest in popular stocks or sectors. This can result in a lack of diversification and a higher risk of losses. Savvy retail investors, on the other hand, can take a contrarian approach and invest in undervalued or overlooked investments that have strong fundamentals.
Finally, savvy retail investors can benefit from the democratization of investment information and tools. The internet has made it easier than ever for retail investors to access investment research and analysis tools that were previously only available to institutional investors. This has leveled the playing field and allowed savvy retail investors to compete with institutional investors on a more equal footing.
In conclusion, savvy retail investors can deliver better investment performance than institutional investors while avoiding significant price slippage. They have the ability to focus on specific investments, act quickly on investment opportunities, manage their trades carefully, avoid herd mentality, and benefit from the democratization of investment information and tools. However, it’s important to note that not all retail investors are savvy investors, and that investing always involves risk. As such, investors should carefully consider their investment goals, risk tolerance, and investment experience before making any investment decisions.
At Investoristics, we provide a great opportunity for those investors who want to sit back, relax, and enjoy better investment performance. So, if you don’t have the time to develop your own investment approach as a retail investor, then why not join “The Collective” and subscribe to our portfolio management newsletter to get significantly higher returns overtime than the overall market with less risk?
