Beating Wall Street?

The media has emphasized how individual investors have banded together on social media sites to beat ‘Wall Street’ at their own game. A real-life story of David vs. Goliath, the small retail investor against the large hedge fund industry. Our last blog post described the short squeeze and its impact on the long-term investor. Although last week’s short squeeze was well-publicized, it wasn’t the first, and it will not be the last.

The reality of the investment world is that the individual investor will not beat ‘Wall Street’. The financial industry is just too big, too well funded, and too protected by government rules, regulations, and safeguards to be beaten like was attempted last week. In fact, except for one or two hedge funds, the financial industry and institutional investors were not impacted. And some hedge funds reportedly made hundreds of millions of dollars in GameStop last week by trading along with the individual investors. Is this about beating ‘Wall Street’ or is it just about trying to get rich quickly?

What is the Goal of Investing?

We have all heard the advice about avoiding “get rich quick” schemes. Unfortunately, many individual investors piled into GameStop last week after it had already risen to unsustainable levels. Many investors are now sitting on substantial losses in their online trading accounts. Some made large profits, and many didn’t.

Although not as exciting as hitting the jackpot, the goal of investing should be building long-term wealth. This takes time and the ability to make disciplined decisions and is precisely where the individual investor has the advantage over ‘Wall Street’. While the money managers in the financial industry must focus on short-term performance like quarterly and annual percentage returns, the individual investor can focus on their own plan to build to wealth over the long-term.
The individual can make decisions about which investments to include as part of a balanced and diversified portfolio that matches their tolerance of risk. The individual has the advantage of maintaining a comprehensive financial plan that keeps the focus on their long-term financial success, not on quarterly returns. The focus becomes the future and not what happened in the past. This is how the individual can beat ‘Wall Street’.

Where to get financial advice?

Financial advice should further an individual’s goal of increasing wealth. It should be specific for that individual and their financial situation. Advice about investments should show how it can help reach the goals in a financial plan. Social media is not the first place that comes to mind for this type of advice.

An independent advisor like Prato Capital is required to always act in our client’s best interests. We are independent of institutional investment firms, allowing us to pick and choose the best solution for each client. Our investment advice is individual and focused on the long-term financial success of our clients. It can change as their needs change or as the markets change. The focus truly is on the individual. We help our clients build wealth.