I do not see why managing billions of dollars is an advantage for them. Sure, it is a big advantage for the wallet of the portfolio manager (the bigger the assets under management, the juicer the fees for him), but managing billions and more restricts severely your horizon of investment securities.
Another point you largely discount is that for institutionals, the biggest risk is not tied to the market or some company : it is by far career risk; if they diverge too far from the common mindset in their securities selection and subsequently fail (whatever that means, failure could just be lagging the market for two following years), they are fired. But it they herd a lot like everybody, even in case of failure they’ll be alright because, hey, everybody else is doing the same (social proof bias).
I’ll grant you that very successful investing takes a lot of time (especially in due diligence), but we live in a world where it has never been easier for the outsider to invest successfully.
When I say “easier”, hear me out, i just mean there are very low barriers to entry. But you still need to learn, read a lot, and yes, work a lot as well.
But think about it : you can easily learn and master accounting online or with books.
You have all the financial reports available at the SEC.
You’ll learn more about investing on the website of Sanjay Bakshi for free than in any costly MBA program.
The hard part afterward is to think.
The second hard thing, as Charlie Munger says, is that “the iron rule of investing is that only 20% of people can be in the top fifth.”
So it is perhaps a hard undertaking, but by saying “I don’t stand a chance”, you make a big favor to everybody else
However I agree with you when you say that it is not wise to try to predict the market. The more I read, the more I realize that a big bunch of successful investors do not try to predict what will happen. What they focus on instead is:
- what is the consequence if i am right (how much do i win)
- what is the consequence if i am wrong (how much i lose)
So for the nerds, they focus on having a convex payoff : “Head I win, Tails I do not lose much”
This is often materialized in the term of “margin of safety”. How much can I be wrong before it starts hurting a lot?
And finally, since @Knoch does not seem to be at ease with just indexing with low cost ETFs, here are two path that he can dig into :
- buying cheap tangible assets (the Ben graham way)
- or buying outstanding businesses (i.e that have a steady high return on invested capital) at a fair price (the Buffett way).
But beware, because as said earlier, both of these paths take much more time than indexing.