Investing is one of those rare pursuits where amateurs can have an advantage over the professionals.
It happens in almost no other field. If I competed against any professional sports person, I’d lose every time. If I was asked to perform dentistry or heart surgery, I wouldn’t know where to start. I don’t have the years of training needed to perform these highly specialised tasks.
However, good private investors, who know what they’re doing, outperform the pros on a regular basis.
I have personal experience of this – the amateur version of myself is outperforming the professional version! The share selections for my personal portfolio, on average, are outperforming the fund I run, despite my personal portfolio receiving far less attention (for the avoidance of doubt, my fund has also significantly outperformed its benchmark and peers).
As a fund manager I have good access to company management teams, third-party research, professional subscriptions and a network of contacts. I attend conferences (virtually nowadays), capital markets events etc. I have Bloomberg data on tap and qualifications coming out of my ears. And yet a significant number of private investors will have performed much better than me.
Despite the pros having access to more resources, I’d argue they’re at a disadvantage to private investors in other ways. This is why so many active fund managers fail to outperform their benchmarks, and why private investors often fare better.