Stock Market Institutional vs. Individual Investors
Many individuals and institutions invest their funds in the stock market through individual stocks, mutual funds, and various derivatives of these financial instruments. Institutions have the advantage of professional investment staffs that are positioned to do exhaustive research in pursuing their investment strategies. Many individual investors also are adept at researching investment options and following their own strategy. The use of a mutual fund also provides the individual investor with access to professional management of their funds through diversification that is hard for the individual to obtain. But the professionals are not always right.
Market Returns – Market Claims and Actual
Those who invest in “The Market” (and the public at large) are bombarded with news of Market advances and regression, and those selling the instruments tout their investment returns. They encourage you to examine their historic returns and provide historic return percentages over several periods of time. However, if you rely on these statements, you are not getting the whole picture. They are often compared to popular indices, such as the Dow Jones. The composition of these comparison stock measures changes over time. In addition, investments made over a period of time constitute a mathematical progression in which each contribution earns a different rate of return at each “snapshot” of the investment according to the state of the Market when the investment is made and when the snapshot is taken. This actual return on the investments will most likely not agree with the historical excursion of the Market.