I'm worried about my retirement, so I started investing in stocks DAY 54 [Why individual investors have an advantage over professionals]
― Walking with Haru, Age 60 Investment Log Day 54 ―
If you know how to fight, you can see the path to victory
I watched one video today as well.
The theme was "Stock selection that even beginners can do."
The stock market is full of professionals.
Institutional investors, fund managers, and experts with decades of experience.
Honestly, I didn't feel like an individual investor could win.
But today, that way of thinking changed.
If you devise a way to fight, there are places where individual investors can fight more advantageously than professionals.
📍 Current location on the roadmap
4 timings when expected EPS changes (DAY 53) → Why individual investors have an advantage over professionals (Today) → Specific conditions for stock selection
📚 What I learned today: 4 strengths of individual investors
① Easier to take on liquidity risk
Professionals (institutional investors) handle large amounts of money, so they cannot enter stocks with low daily trading volume.
Even if they could buy them, the professionals would drive up the stock price themselves by buying in large quantities. They also struggle when selling because there are few buyers.
That is why institutional investors can only handle famous stocks with large market capitalizations and high trading volumes.
Individual investors are different.
We can buy and sell small companies with market capitalizations of 10 billion or 50 billion yen normally.
There are no professionals in the world of those small companies.
It is a battlefield only for individual investors.
② Not bound by short-term performance
Professionals have an obligation to report their monthly and annual results to the people who have entrusted them with their money. Therefore, they must continue to produce short-term results.
Individual investors do not have those constraints.
There is no need to produce results in one or two months.
You can hold onto them patiently for one or two years. Just being able to do that gives you an advantage over professionals.
This is a major strength of individual investors.
③ No need to worry about cash ratio
Since professionals are managing other people's money, they cannot keep it in cash. They must always keep it invested.
Individual investors are using their own money, so they can hold more cash when the market is difficult.
You only need to go for the win when it is easy to win.
This is also a way of fighting that is only permitted to individual investors.
④ No restrictive rules
Institutional investors have various rules. For example, they cannot put more than 5% of their total assets into a single stock, or they cannot buy stocks with trading volumes below a certain level.
Individual investors do not have such rules.
You can move freely with any stock at any time.
Making institutional investors your customers
There is a concrete strategy that leverages these four strengths.
Find and buy stocks that institutional investors want to buy but cannot yet due to their rules.
For example, suppose there is a company with a market capitalization of 8 billion yen. Institutional investor rules state they can only buy stocks with a market cap of 10 billion yen or more. However, the company's performance is growing.
The moment this company's market capitalization exceeds 10 billion yen, institutional investors will all come to buy it at once.
You just need to sell to them then.
That is the moment when institutional investors become your "customers."
Do not fight on the same battlefield as the professionals.
Buy in before the professionals arrive, and sell to the professionals.
This is the winning path for individual investors.
⭐️ Key Points
The strengths of individual investors are being 'small, free, long-term, and rule-free'.
Buy stocks that institutional investors cannot buy in advance, and sell them to institutional investors.
This is a way to win even as a beginner.
💬 Satsuki's questions and Haru's answers
🌸 Me: 'Haru-san, how do I check if a market capitalization is 10 billion?'
🌱 'You can easily check it using stock scouts or brokerage apps. Market capitalization is also displayed on the stock detail page in apps like Matsui Securities or Rakuten Securities. First, try searching for a company you are interested in.' - Haru
🌸 Me: 'Does selling to institutional investors really work that well?'
🌱 'It doesn't work for every stock. However, if it's a small-cap stock with growing performance and a simple business, there is a high possibility that the market capitalization will increase along with its growth. In that process, institutional investors will enter. The logic is sound.' - Haru
There are places where we have an advantage over professionals.
I felt like those words gave me a little push.
There is no need to do difficult things.
Move in places where professionals cannot go, before they arrive.
It was simple.
📝 Summary of today's lesson
The 4 strengths of individual investors:
Taking liquidity risk, holding for the long term, holding cash freely, and having no rules.
Buy small-cap stocks that institutional investors cannot buy in advance, and sell them to institutional investors.
Do not fight on the same battlefield as professionals.
That is the winning strategy for individual investors.
I watched the video, took notes, and summarized them into an article.
A total of 1 hour.
1 hour every day. That is all it takes.
I believe that continuing is my greatest talent.
Next time: '4 conditions for specific stock selection'.
I will learn the specific criteria for what kind of stocks to choose.
I will continue tomorrow as well.
📣 "Friends Walking with Haru" is currently in preparation.
I am creating a place where friends who have started investing just like me can report their progress and support each other in continuing.
If you would like to participate, please let me know in the comments 🌸
📚 Click here for related articles for DAY 54
https://note.com/satsuki_60/n/n0fd24d0de1c8
#FundamentalAnalysis #StockSelection #IndividualInvestor #InvestmentBeginner #InvestingInYour60s #RetirementAnxiety #StartedWithAI #WorkingTogetherWithHaru
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