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This chapter is from the book

The Whales of Wall Street

Wall Street is dominated by Whales. These are the giant mutual funds, pension plans, hedge funds, institutions, and brokers that trade the vast majority of volume on Wall Street every day. These entities aren’t just big; they are huge and powerful and have the capacity to move the market when they are so inclined. On any given day, at least 80% of the volume of stocks traded on Wall Street is produced by the Whales.

The mistake that the vast majority of individual investors make is that they believe that the best way to invest is the exact same way the Whales of Wall Street invest. They strive to be miniature versions of giant funds. They use the same strategies and approaches that billion-dollar mutual funds employ. What is really surprising is that most investors are so indoctrinated by Wall Street that they believe they can actually beat the Whales by playing the investing game the exact same way the Whales play it.

What do you think the chances are that an individual, sitting at home with limited information, can find better investments than a fund that spends millions of dollars on research, has easy access to company management, and employs teams of people to dig into every aspect of a business?

Unless you are extremely lucky, trying to compete against a mutual fund by mirroring its techniques is not a strategy that will produce superior results. It is like challenging a sumo wrestler to a wrestling match. There is no chance of beating him at the thing he does best. However, if you challenged him to a foot race, a game of basketball, or something where his size is a disadvantage, your chance of success would be very high.

Sharks don’t try to play the investing game the way the Whales of Wall Street do. That is futile and unproductive. Sharks approach the market in a way that allows them to capitalize on their speed, cunning, and flexibility.

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