Daily General Discussion and Advice Thread - December 18, 2024

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[u/Dramatic-Morning-100]

Trying to be a smart long-term investor, but also trying to BUY smart; i.e., on the dip. Problem is, the more cynical among us say that by the time any indication of a good buy comes out to us mere mortals, the big money insiders have already manipulated the stock to their advantage. Which is why we have no recourse but to stay indexed forever.

Is the market more heavily influenced by these nefarious insiders, or by the whims of us relatively uninformed but far more numerous retail trading masses? What sources could tell us?

[u/greytoc → u/Dramatic-Morning-100]

Nefarious insiders? Don't believe the silly nonsense and the baseless conspiracy theories on social media.

The vast majority of dumb stuff about stock manipulation isn't real.

The amusing narrative is that many index investors will point out that most "inside money" or "smart money" can't beat US large cap growth indices.

In general, it's a lot more complicated than that. Active investing takes a lot of work and index investing is sometimes just easier for many people.

[u/Dramatic-Morning-100 → u/greytoc]

Well, some of the social media I'm getting this from is r/investing, which I know is sometimes silly and baseless. OTOH, I'm under the impression that the "lot of work" necessary to beat indexing isn't going to pay that much more at the scale of my meager portfolio.

I was mostly just curious to know how much weight the institutional investors wielded on the market compared to individuals like us. And, I guess by extension, how much their influence counted on the market's direction.

[u/greytoc → u/Dramatic-Morning-100]

I guess it depends on what you mean by "us" - do you mean self-directed retail investors?

An institutional investor is simply an entity that is investing a piv (pooled investment vehicle) on behalf of someone else. Often times - it's a retail investor through mutual funds, ETFs, hedge funds, pensions, etc.

One of the largest pension institutional investors is the Federal Retirement Thrift with an AUM of over 850bn in assets. And also CalPERS which is the California public employees pension fund at 500bn AUM. These funds are investing on behalf of federal and state employees.

So - yeah - they have influence on market prices from the point of view that they have a lot of capital. But they are also limited by liquidity and risk mandates.

The largest institutional investors at the moment are Blackrock and Vanguard. That's because they both offer a lot of very popular ETFs and mutual funds.

[u/Dramatic-Morning-100 → u/greytoc]

"I guess it depends on what you mean by "us" - do you mean self-directed retail investors?"

Yes, exactly. Good points about "institutional investors". I admit I had only been thinking about big Wall Street investment companies, of which I really only have a hazy, and probably very erroneous, idea.