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the only thing you should know about the Stock Market: it favors those with more capital, if you don’t have much to begin with, don’t expect making life-changin

the only thing you should know about the Stock Market: it favors those with more capital, if you don’t have much to begin with, don’t expect making life-changing amounts

rlayton2 5y ago
I think like lots of things... If you expect to do better than other people, be prepared to know more or do more then them. Many people dedicate their lives to learning the stock market and what to do. It's unlikely someone can beat them with doing the bare minimum research. Not saying there isn't shady stuff going on too. There definitely is, but even if there wasn't it is a skill based game.
- DoingIsLearning 5y ago
  > Many people dedicate their lives to learning the stock market and what to do. It's unlikely someone can beat them with doing the bare minimum research. This hints at some sort of deserved meritocracy that just doesn't exist. Funding is king nowadays when a large fraction of trades happen via HFT. Implying that all you need is knowledge in order to reach wealth is misleading at best.
  - bidirectional 5y ago
    HFT is irrelevant, those firms basically compete with themselves and there's really not all that much money in it anyway. They're just providing liquidity and can basically be ignored 99% of the time.
    - nly 5y ago
      You realise there are proprietary trading firms with algorithms making billions of $ every year just trading stocks at high frequency, right? If anything they actively avoid trading against themselves and seek out opportunities in markets where retail investment is still at high participation.
      - bidirectional 5y ago
        Yes, they make a few billion between them in an ultra-competitive, expensive to compete in environment. My wording wasn't the best, but what I meant is that HFT firms only compete with other HFT firms. They're basically all battling to offer the cheapest service possible to other market participants, and can offer even better prices to retail due to the non-toxicity of the flow. Virtu has a market cap of what, 6bn? Citadel was valued at 22bn from the recent funding round. Those are the biggest players in the space, and it's becoming increasingly monopolised. Meanwhile JP Morgan has a market cap of 450bn, BlackRock a market cap of 110bn, and BlueCrest manages 40bn of its own money. Considering how much attention it gets, HFT is pretty innocuous. The notororiety is basically because they pay 23 year olds 400k/year and it sounds scary to outsiders.
        nly 5y ago
        Most prop trading firms arent public. Rentec have something like $150bn under management and are making 20-40%/yr return. If they had a public "market cap", they'd be huge
        carnitine 5y ago
        Medallion makes those returns and is capped at 10bn. The rest is more traditional fund management (and performance isn’t great). Also from what I understand Medallion is HFT in one sense (fast trading with short hold times) but not to the point proper firms are where being fastest is necessary for edge.
- alexb_ 5y ago
  Monkeys throwing darts have produced better results than most hedge funds.
  - bidirectional 5y ago
    They definitely haven't. The paper I think you're alluding to showed that monkeys picking 30 random stocks from a 1000 stock universe performed better than a capitalisation-weighted index of the 1000 stocks. However the former will obviously have greater exposure to small-cap stocks, which were known to outperform the bigger stocks.
zirobi 5y ago
Unless you know the market better than everyone else, having more capital can just as easily be a way to lose faster. Most of the smart money is in hedge funds anyway.
- cinntaile 5y ago
  But hedge funds don't tend to make a lot of money for the investor?
bluecalm 5y ago
Why do you think so? I think it's the opposite. With little capital you have way more opportunities in medium/small/micro caps while someone like Warren Buffet has limited pool of possible investments as you can't pour billions into 100m company.
tiborsaas 5y ago
I thought the same, but then I've seen this article :) https://12ft.io/proxy?q=https%3A%2F%2Fqz.com%2F2108874%2Fthe-maximum-amount-of-money-you-could-have-made-trading-in-2021%2F https://12ft.io/proxy?q=https%3A%2F%2Fqz.com%2F2108874%2Fthe...
- WA 5y ago
  That article is… useless. But actually, it shows exactly what the parent poster said: the real riches came only after you had a lot of capital. Sure, $1,000 to $85,000 is a great performance, but not life changing in itself.
  - tiborsaas 5y ago
    How is having $1000 invested proving OP's point? There are lots of problems with this article if you take things in it at face value, but what you mentioned are not really. Why did you cherry-pick the 85k value? I just posted this to show that at least the math can work even with extremely small amounts. Having lots of capital only buys you lower and lower risks.
agumonkey 5y ago
Trading is a clear example of money helping to make money. When wealthy you can take more smaller yet useful risks, wait longer, have more time to learn from mistakes. Low capital means waiting for very long to accrue anything meaningful and often you'll lose it all before you get to learn or have to sleep/eat less to gain new capital to invest.
globular-toast 5y ago
Not just that but if something is on the stock market in 2022, the big gains have already been extracted. The people with large amounts of capital privately invest then use the stock market to cash out.

the only thing you should know about the Stock Market: it favors those with more capital, if you don’t have much to begin with, don’t expect making life-changing amounts

rlayton2 5y ago

I think like lots of things... If you expect to do better than other people, be prepared to know more or do more then them. Many people dedicate their lives to learning the stock market and what to do. It's unlikely someone can beat them with doing the bare minimum research. Not saying there isn't shady stuff going on too. There definitely is, but even if there wasn't it is a skill based game.

DoingIsLearning 5y ago
> Many people dedicate their lives to learning the stock market and what to do. It's unlikely someone can beat them with doing the bare minimum research. This hints at some sort of deserved meritocracy that just doesn't exist. Funding is king nowadays when a large fraction of trades happen via HFT. Implying that all you need is knowledge in order to reach wealth is misleading at best.
- bidirectional 5y ago
  HFT is irrelevant, those firms basically compete with themselves and there's really not all that much money in it anyway. They're just providing liquidity and can basically be ignored 99% of the time.
  - nly 5y ago
    You realise there are proprietary trading firms with algorithms making billions of $ every year just trading stocks at high frequency, right? If anything they actively avoid trading against themselves and seek out opportunities in markets where retail investment is still at high participation.
    - bidirectional 5y ago
      Yes, they make a few billion between them in an ultra-competitive, expensive to compete in environment. My wording wasn't the best, but what I meant is that HFT firms only compete with other HFT firms. They're basically all battling to offer the cheapest service possible to other market participants, and can offer even better prices to retail due to the non-toxicity of the flow. Virtu has a market cap of what, 6bn? Citadel was valued at 22bn from the recent funding round. Those are the biggest players in the space, and it's becoming increasingly monopolised. Meanwhile JP Morgan has a market cap of 450bn, BlackRock a market cap of 110bn, and BlueCrest manages 40bn of its own money. Considering how much attention it gets, HFT is pretty innocuous. The notororiety is basically because they pay 23 year olds 400k/year and it sounds scary to outsiders.
      - nly 5y ago
        Most prop trading firms arent public. Rentec have something like $150bn under management and are making 20-40%/yr return. If they had a public "market cap", they'd be huge
        carnitine 5y ago
        Medallion makes those returns and is capped at 10bn. The rest is more traditional fund management (and performance isn’t great). Also from what I understand Medallion is HFT in one sense (fast trading with short hold times) but not to the point proper firms are where being fastest is necessary for edge.
alexb_ 5y ago
Monkeys throwing darts have produced better results than most hedge funds.
- bidirectional 5y ago
  They definitely haven't. The paper I think you're alluding to showed that monkeys picking 30 random stocks from a 1000 stock universe performed better than a capitalisation-weighted index of the 1000 stocks. However the former will obviously have greater exposure to small-cap stocks, which were known to outperform the bigger stocks.

zirobi 5y ago

Unless you know the market better than everyone else, having more capital can just as easily be a way to lose faster. Most of the smart money is in hedge funds anyway.

cinntaile 5y ago
But hedge funds don't tend to make a lot of money for the investor?

bluecalm 5y ago

Why do you think so? I think it's the opposite. With little capital you have way more opportunities in medium/small/micro caps while someone like Warren Buffet has limited pool of possible investments as you can't pour billions into 100m company.

tiborsaas 5y ago

I thought the same, but then I've seen this article :) https://12ft.io/proxy?q=https%3A%2F%2Fqz.com%2F2108874%2Fthe-maximum-amount-of-money-you-could-have-made-trading-in-2021%2F https://12ft.io/proxy?q=https%3A%2F%2Fqz.com%2F2108874%2Fthe...

WA 5y ago
That article is… useless. But actually, it shows exactly what the parent poster said: the real riches came only after you had a lot of capital. Sure, $1,000 to $85,000 is a great performance, but not life changing in itself.
- tiborsaas 5y ago
  How is having $1000 invested proving OP's point? There are lots of problems with this article if you take things in it at face value, but what you mentioned are not really. Why did you cherry-pick the 85k value? I just posted this to show that at least the math can work even with extremely small amounts. Having lots of capital only buys you lower and lower risks.

agumonkey 5y ago

Trading is a clear example of money helping to make money. When wealthy you can take more smaller yet useful risks, wait longer, have more time to learn from mistakes. Low capital means waiting for very long to accrue anything meaningful and often you'll lose it all before you get to learn or have to sleep/eat less to gain new capital to invest.

globular-toast 5y ago

Not just that but if something is on the stock market in 2022, the big gains have already been extracted. The people with large amounts of capital privately invest then use the stock market to cash out.