The Unique Advantage of Individual Investors
In a recent post, Shen Yu, co-founder and CEO of Cobo, discussed the unique strengths that individual investors possess in the financial markets. He emphasized that this strength doesn't lie in better information or larger capital, but rather in the fact that they 'have no one to answer to.'
Institutional Constraints
Institutional investors, especially funds, are often bound by various structural constraints such as LP (Limited Partner) demands, drawdown limits, and quarterly performance reviews. These factors frequently force institutions to cut losses at the worst possible moments, often leading to forced selling at unfavorable prices.
Flexibility for Individual Investors
On the other hand, individual investors are free from such institutional restrictions. They can take advantage of market volatility and extend their investment horizon, allowing them to acquire assets that are being sold off due to institutional pressures during market downturns. This strategy not only reduces risk but also enhances long-term returns.
- No pressure from quarterly performance reviews
- Not constrained by LP or external investor demands
- Ability to choose optimal entry points
Shen Yu pointed out that it is precisely this freedom that gives individual investors an edge over institutions in certain scenarios. They can focus more on long-term value rather than short-term market fluctuations.