It’s a fairly reliable rule in financial markets that big money makes money, and small money loses money. This is because big money operates to longer timeframes, with less emotion, more visibility and more guile than does small money. In addition, big money tends to not lever its last dollar up 3x for a YOLO play right before options expiry and then wonder why Wen Lambo turned into, Wen Bailiff.
You can mutter, “manipulation”, if you like, or you could just say, big money plays the game better.
If you want to improve your chances of making consistent money over time in financial markets, we suggest you learn to run with the big dogs. You don’t have to get a job at a hedge fund; you don’t have to inherit Mom and/or Pop’s life savings; you don’t have to first YOLO. You can run any regular brokerage account to big-money rules.
Rule Number One is: prepare to be bored. Retail thinks that investing is exciting. That couldn’t be more wrong. It’s only exciting if you are doing it wrong. You know what a consistently successful pro investment firm looks like? Bunch of boring people doing boring things day in day out. The best of them can afford to buy a Lamborghini any day of any week - actually the very best of them can just buy Lamborghini itself - but they don’t. Buy one. Too noisy, too ostentatious, too exciting. They likely drive a three-year-old Model S. A white one. With regular plates. If you want to be consistently successful at investing? Learn to love boring. Better still, learn to not even notice whether you are bored or not. Invest, as we exhort our subscribers, like you be dead inside.
Rule Number Two is: learn how big money runs, and study what big money is doing at any particular time. And then do that. Learn what retail is doing at any particular time. And don’t do that. Most often, big money is doing the opposite of retail. If big money is on CNBC telling you hey wow this is going up and this is going down, do you really think they have your best interests at heart? If the financial and/or regular press is full of how the next trend is down, is it really likely to be down? Really? Why would anyone care to give you a heads up like this? In financial markets, the game is simple. You are trying to take money off of other people, and all the other people are trying to take money off of you. Big money has learned how to take a lot more money off of the little people than the little people take off of it. If institutions are selling short dated $SPY puts? You probably don’t want to be loading up on them. Funds are buying $ARKK when Cathie is all out of fashion? Why would you sell your $ARKK to them?