The Long and Short of it #1 - Can a Little Guy compete?

The Long and Short of it.  #1

Someone recently asked, “Can a regular small investor compete with the 'big guys' on Wall Street”? He then asked why I was smiling.

The smile came from many years of observing “big guys” as U.S Exchange floor traders, investment managers and guys in the bar. I spent over 25 years as a member of National Securities Exchanges.

The biggest guys these days are hedge funds. Fees in this sector usually run 2% of assets AND 20% of profits. Big fees. According to USA Today (Jan 8, 2015) their returns for 2014 averaged 2.5% for this sector. The S&P index rose 11.4% for calendar 2014.

Can an individual do better than “big guys”? Absolutely. Requirements, however, are stiff. These include having a plan and committing time to execute that plan. I will write more along this there in the future, so please keep following.

Modern Portfolio Theory and EFTs

There has been much written of late about risk, diversification, and some time honored ways to participate in very volatile and uncertain markets with the hope of reduced risk profiles.

Complicated theories abound. The basic theme of many is to reduce volatility and diversify. This thought has been around for many years. It has been called by many names, but despite exotic packaging it is still Modern Portfolio Theory. MPT has proven profitable for many, and the Holy Grail for others.

Regarding U.S. investors, my answer is far too simple for many. I believe one should invest a comfortable amount of needed safe cushion funds in laddered U.S. Treasury securities. In my case this is 75% of available assets. The remainder should be thoughtfully but aggressively invested in available ETFs. For investing in EFTs I believe SectorSurfer is the definitive and necessary tool.

Please contact me for further background and information on this theme.