I get it now!

In my last post i spoke about 1Wealth’s method of getting in and out very quickly and looking for individual stocks with the potential to make a small, quick profit. My big question was since it works so well and seems so basic, why the heck isn’t everyone doing it. I was chatting with Andy about switching my super to self managed and couldn’t resist asking. He pointed out some obvious stuff which made sense. Here is the jist of it - as an individual trader i buy 8 or 9 thousand dollars worth of shares...an easy amount to get in and out of the market with. A bank though is dealing in huge volumes, millions of dollars worth of shares. For a start, that limits the style of stocks they can invest in and also if they do make a quick profit they can’t simply offload millions of dollars worth of stock to realise that profit. That sort of sale would create an over-supply and the profit would very quickly deteriorate as the share price contracts. It seems for once being the small guy is beneficial. You have so much more flexibility. I didn’t ask but I guess it applies to the downside as well. When the 1wealth program picks a stock that goes backwards they cut out at a small pre-determined loss and then invest into something about to move up, i’m assuming banks would have to ride out a bad stock for the same reason as before, they can’t dump millions of shares or the price will dip even further. So good or bad they are in for the long haul. I am starting to understand why this system works so well. Up to now it always seemed a bit surreal that a humble high school teacher could do better than the top dogs at Macquarie Bank. But it’s obviously two very different ways of trading, they want 20% per year on a billion dollars whereas i’m looking for an income of 80k. Our strategies are nearly the complete opposite. Off on a tangent, i’ve heard there are shieks with so much money that they are constantly looking for fund managers to take hundreds of millions to invest for them, they literally have millions of dollars every week they need to find a home for and their biggest challenge is finding places to invest it....what a great problem to have. Anyway, back to reality, this month has been a pretty good one, should be over 20% for the month which is a tidy profit now my portfolio is bigger.

Another solid month.

There is so much uncertainty in the news everyday about the eurozone and possible double dip recessions but the program seems to carry on unfazed. It’s such a simple concept, take tiny gains, reinvest them, create a compounding effect, it’s been working so well I can’t understand why more people aren’t doing it. Why aren’t the banks doing it?