Institutional investors vs. Retail investors
Inst’l investors approach markets completely differently from retail.
As an inst’l investor by day and crypto retail degen by night, here are 4 lessons from inst'l investing and how you can use them to improve your approach.
- Time Horizon
🏛️Inst'l: long-term time horizons. Typically 5-10+ years.
The best funds are built to last decades, not a 3-6 month bull run.
🦧Retail: thinks this is their one chance to make it.
“Need to make it now before the bear!”
This mentality makes retail easy to manipulate and is why so much of crypto runs on hopes and dreams that never come to fruition.
Pipe dreams are an easy sell if people desperately want to believe them.
Lesson: have a multi-year plan. Keep your job so you can invest new $.
- Experience
To raise outside funds, you need a track record. Fund managers have 10+ years of experience investing (or 2-5+ years in crypto). Compare that to your typical crypto trader that just started to trade/invest in the last few months with zero knowledge.
It takes time and repetition for concepts to click, learn how a market works, players involved, why things succeed/fail, etc.
Experience and time horizon go hand in hand. If you're just learning crypto, what you're sure is 100% right today won't be the case in 6-12 months.
Copy trading on Twitter, signals groups.. may work a couple of times but won’t make you a better thinker. Most of u will lose money and exit the market.
Take the slightly longer route. Figure this stuff out while everyone else chases the next tweet notification. It's worth it.
- Relationships
If you think crypto whales, traders, etc. plot together to make money.. Well, hate to break it to you, that is how all of life works. Relationships matter, and inst'l investors know this well.
You need to connect with other winners. Share ideas. Get intel.
Luckily, this is an area where crypto has a huge advantage.
You are an anon on the internet and quite literally have nothing to lose. You can DM anyone, ask anything, maybe you'll get a response. Maybe you'll make a friend.
Put out content, share alpha. Build something. Try.
- Expectations-driven
🏛️Inst'l: Always focused on future expectations. You're trying to figure out what will happen, how market will react & pricing accordingly. You plan your entry & exit. You are monitoring, adjusting your view & even actively working w/ co. if private market
🦧Retail: Reactionary. Price goes up you think it goes up forever. Price goes down you think it's over and you sell. No conviction. No monitoring. You feel out of control a lot and are easily manipulated.
Lesson: Have a thesis, plan an entry and an exit, monitor your investment
Some of these things might sound basic and obvious to some of you. Yet they make all the difference.
Time horizon, experience and relationships inform your expectations and help manage risk as an inst'l investor.
They compound over time and collectively become your "edge."
And an edge is to an investor what a moat is to a company. FIN.
