It is my contention that there are two ways that the average investor at home can gain an advantage over the algorithms, institutional investors, bankers, traders, and every other nebulous entity that we include in the definition of “Wall Street.”
My first conclusion is that investors can make money if they choose to embrace volatility. Whether it be oil stocks, media stocks, or financial stocks, certain sectors of the economy are prone to quick and sudden shifts that result in quick 30% rises or falls in their stock prices due to the recency bias that is created upon examination of a company with a cyclical business model (in other words, we overweight recent earnings results in performing expecting calculations of what the future for the business will bring.)
My second conclusion is that investors can make money by having a longer time horizon than everyone else. There are very few … Read the rest of this article!