Culture
Recycles dryer sheets
- Joined
- Apr 15, 2007
- Messages
- 491
The recent market gyrations have started me thinking about market volatility, the response of the "average" investor, and who benefits from this situation.
Most institutional investors, such as private wealth management, dynastic/institutional trusts, pension funds, universities, etc. do not panic and sell their equities during market drops. In fact, most of these investors have significant cash reserves which are used to purchase cheap equities during market drops. When this happens, this results (long-term) in a large transfer of wealth from the uninformed small investor to larger, more sophisticate investors. I am doing this myself.
I have to wonder if some of the forces pushing 401(k)'s and other self-directed investments by "Joe Six-pack" consider this when lobbying the government. I suspect that one could show that sophisticated, long-term investors gain larger returns with high volatility than with lower volatility. Buy on panic, sell on euphoria.
Am I wrong?
Most institutional investors, such as private wealth management, dynastic/institutional trusts, pension funds, universities, etc. do not panic and sell their equities during market drops. In fact, most of these investors have significant cash reserves which are used to purchase cheap equities during market drops. When this happens, this results (long-term) in a large transfer of wealth from the uninformed small investor to larger, more sophisticate investors. I am doing this myself.
I have to wonder if some of the forces pushing 401(k)'s and other self-directed investments by "Joe Six-pack" consider this when lobbying the government. I suspect that one could show that sophisticated, long-term investors gain larger returns with high volatility than with lower volatility. Buy on panic, sell on euphoria.
Am I wrong?