Institutional investors are called the "smart money"
Why most aren't beating the S&P 500?
Kind of "If you are so smart why ain't you rich?
2007-02-28 10:03:45 · 7 answers · asked by Carlos G 3 in Business & Finance ➔ Investing
Of course they are rich monetary speaking!
By rich, I mean beating the market.
2007-02-28 10:24:51 · update #1
lol, who said institutional investors are smart?
It's true that they have models and that most of the managers are very rich, but that does not at all mean that they're smart.
In fact, that's why so many of them don't outperform the market.
Now, if you attribute smart to being rich then ya, perhaps they are, but I don't. After all, Barry Switzer made a lot of money being the Cowboys coach, but he was definitely not the brightest bulb in the pack.
Hope that helps!
2007-02-28 15:39:47 · answer #1 · answered by Yada Yada Yada 7 · 1⤊ 0⤋
WE ARE RICH: The institutional investors are smart, smart enough to know that when everybody is going in the same direction, the scale will shift the other way. To beat the market everyone would have to stand still. This is good for those that are gaining at the time everything stops, and bad for those loosing at the time everything stops.
The amount of loss of those loosing is equal to all they have, and then the dynamics change. You can't loose what you don't have, and you can't gain what the opposition don't have. Your question is based on the principal that if you are smart, good, or what ever you will stay ahead of the pack.
In reality, BY NOT SEEKING TO BE PART OF THE PACK, YOU BEAT THE PACK. It is a case where the pack has to join you not you joining the pack. As I was growing up, my life was a great wonder as long as I sat on the outside and watch everyone running around trying to get "THE NEXT GREAT THING".
2007-02-28 10:16:25 · answer #2 · answered by whatevit 5 · 0⤊ 0⤋
The thing you have to remember is that institutional investors are the market-- most of the money in the stock market is controlled by big institutions, which means that not all professional managers can beat the market. Also the market is reasonably efficient--which is to say that most stocks are priced at a level most of the time where it isn't blindingly obvious that the company is a strong buy/sell.
2007-02-28 12:05:50 · answer #3 · answered by Adam J 6 · 1⤊ 0⤋
Now, let's get clear here. If the goal is to do at least as well as the S&P, that can easily be accomplished by trading a basket of 500 stocks. Simple. So why do nearly all Institutions fall short? (I know you can figure this out). Because institutions have expenses. They pay portfolio managers, traders, and consultants. They pay for newspapers, advisory services, computer terminals. They pay commissions. They pay for big impressive buildings. With all of that cost, the wonder is that they ever beat the index.
2007-03-01 00:55:39 · answer #4 · answered by anywherebuttexas 6 · 0⤊ 0⤋
Most institutional investors are indeed rich. Average salary for a major mutual fund manager is about $600,000.
2007-02-28 10:21:34 · answer #5 · answered by Box815 3 · 0⤊ 0⤋
It goes back to some college study where they had a group of monkeys throw darts at a wall street journal investment page, then pick those same stocks that the darts landed on.
Ironically enough, the monkeys did just as good as the investment professionals.
Just goes to show that wall street investment is little more than legalized gambling.
2007-02-28 10:08:43 · answer #6 · answered by summit_of_human_intellect 3 · 1⤊ 0⤋
do nnno
2007-02-28 10:07:41 · answer #7 · answered by bidius2000 2 · 0⤊ 0⤋