If you’re just an average person in the world, you have an edge already. If you choose to invest like one, then you’re doomed to perform like one. You don’t have to invest like a big bureaucratic institution. But for most expert investors, acceptable mediocrity is far more comfortable than diverse performance. By definition, their results are going to be mediocre. Instead, they’ll wait until the analysts pile up on it. That’s why security-conscious portfolio managers miss the shot at snagging the ‘ten baggers’ (stocks that go up 10x). Some stocks require very little explanation. And the bigger the client, the more talking the portfolio manager has to do to please him. Secondly, they need to tell their ultimate boss, the clients. First, they need to tell their immediate boss in their department. No fund managers will lose their job, making bad investments into well-known and established companies like Amazon.īut if your relatively unknown company goes bad, they’ll ask: “What’s wrong with you?!”įund managers spend a lot of their time talking to clients about the decisions they’re making. Success is one thing, but it’s more important not to look bad when you fail. The typical fund manager will prefer losing a small amount on an established company, rather than having a shot at making an unusually large profit on an unknown company.

It is the rare professional who has the guts to traffic in an unknown stock. But by the time they have labelled it a ‘buy now!’, the opportunities have passed. Or until a sufficient number of Wall Street Analysts have put it on the recommended list. Under this current system, a stock isn’t truly attractive until a large number of institutions have recognised its suitability. You won’t see too many ex surfers, uber drivers, high school dropouts or working-class battlers. They all read the same newspapers, listen to the same economists and follow the same trading software signals. To understand the advantages over Wall Street, you need to look at the minds of the people in the industry. If you exploit these, you can outperform the experts. In comparison, investing is a unique industry in which amateurs have some inherent advantages over the pros. But you don’t expect a plastic surgeon to advise you to do your own facelift, a plumber won’t tell you to install your own toilet nor will a hairdresser teach you to cut your own hair. The most important rule to follow is that you should stop listening to professionals! The obvious paradox here is that he’s a professional, giving us advice to ignore professionals. Peter Lynch is one of the most successful professional investors of all time. But under a particular set of circumstances, you may be in the box seat of investment opportunities that professional investors aren’t able to see. Most investing books assert that you’re better off taking a diversified slice of the whole market so you don’t need to monitor your portfolio continually.

. one up on wall street