BBs have great advantages in terms of money, people and relationships. However, BBs have many huge weaknesses in investing that individual investors can take advantage of to find their advantage. Don’t think that BBs are formidable, can make the market price and are the “sure winner”. The first thing is Liquidity!
Last week, a colleague who is the head of the investment department at a large securities company lamented to me that this year the market is too difficult, the year is almost over, but so far, the target (profit) has not been reached. Now the whole team scans the stock but can’t find any code that meets the requirements.
The “requirement” this friend is referring to is primarily a liquidity requirement because of the fact that at this stage in the mid-cap list, there are still plenty of stocks at attractive valuations.
“There’s a huge advantage that you don’t-have-a lot of money. I think I can make 50% profit per year with 1 million USD capital. I can assure you of that.
If I were investing with a small amount of capital, I would do it almost completely differently than we do. Thousands of other opportunities and options will appear if you just invest $10,000 instead of $100 billion, you won’t necessarily buy an entire company. Surely you will have a very high profit with a small capital.” — Warren Buffett. (Read more: How to Read Warren Buffett’s Financial Statements)
Normally with 1 BBs, a share purchase and sale has a minimum value of about 100 billion VND. Each trading session can disburse from 4 to 5 billion to meet the price requirements and not affect too much on the price (except for a few cases of buying agreement).
Considering the current Vietnamese market, there are not too many options for BBs to buy, only about 50-60 stocks meet the requirements for liquidity (not to mention valuation, investment quality). Not to mention that there are so many BBs that make the “game” much more cramped and fierce.
Buying is hard, selling is even harder!
If you have friends who work in investment funds or investment blocks in securities companies, you can ask to verify this.
All BBs must calculate the exit point in advance. The investment team will have to put the stock in a stress scenario to assess the liquidity of the stock and estimate the exit point with a large number of shares, ensuring the stock price does not fall quickly. and guaranteed profits.
There are stories of “crying and laughing” that sometimes you see funds holding a stock for many years 3 to 5 years, sometimes the price drops sharply and still “determined” to hold it, so you think If it is a fund, it must be held for such a long time.
In fact, in many cases, liquidity dropped too much compared to the time when the fund bought, the fund could not sell anymore and had to “bitterly” hold reluctantly.
These limitations make the number of investment opportunities of BBs will be very small because even though the stock is very attractive, they cannot buy enough and cannot guarantee a profit when sold. Buying stocks then only increases the risk of capital loss.
You can verify this by “looking at” the portfolios of investment funds, securities companies, you will see that the stocks in their portfolios overlap a lot, simply because they do not. There are better options.
On the contrary, individual investors with a small amount of capital (even with 10-20 billion) also mean a greater number of investment opportunities. You can easily buy, sell your entire position in just 1 trading session. It’s also easy to choose mid-cap stocks, with phenomenal growth and high returns (even times!).